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Carta's 83b Oversight: A Tax Trap for Married Startup Employees (2023)

129 点作者 hkhanna超过 1 年前

13 条评论

quartz超过 1 年前
&gt; Manually file your 83(b). Don&#x27;t use Carta to do it. Instead, download the form from the IRS website, fill it out, and mail it to the IRS within the strict 30-day deadline. You&#x27;ll need to get a signature from your spouse, too.<p>I could be wrong but last time I checked the IRS doesn&#x27;t provide an official form for this. It <i>does</i> provide a sample election letter[1] but this sample does not include a space for a spouse to sign. You&#x27;d need to include an additional line for this yourself in the letter you draft if you wanted it.<p>Don&#x27;t forget: if you do this yourself make sure to mail it certified mail with return receipt as physical evidence that it was delivered.<p>A few months after delivery you can also call any IRS service center and ask them to verify they have the letter on file (these days everything is scanned into the system so any IRS person can find it vs. having to call the center that received it).<p>[1] <a href="https:&#x2F;&#x2F;www.irs.gov&#x2F;pub&#x2F;irs-drop&#x2F;rp-12-29.pdf" rel="nofollow">https:&#x2F;&#x2F;www.irs.gov&#x2F;pub&#x2F;irs-drop&#x2F;rp-12-29.pdf</a>
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jameslk超过 1 年前
From our tax advisor:<p>&gt; The article from the Khanna Law website is incorrect. There is no guidance or authority that requires the spouse of the service provider to sign the 83(b) election. The article indicates that if a service provider lives in a community property state like California, the service provider&#x27;s spouse must file the 83(b) election form, presumably because the spouse acquires an interest in the stock. But there is no guidance to that effect. Rather, Treasury Regulation Sections 1.83-2(a) and 1.83-2(e) are quite clear that only the service provider is required to sign the election form without regard to who will have an interest in the stock subject to the election.<p>Take that for what you will. IANA&#x2F;tax advisor etc.<p>EDIT: There&#x27;s also a great explanation of why this seems to be a nonissue by gamblor956 at the bottom of the comments, who is a purported tax lawyer (I&#x27;m not sure why their comment is not more upvoted): <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=38972557">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=38972557</a>
chachra超过 1 年前
It seems to be a non-issue to me. From my attorney a few months back:<p>&quot;We follow the practice of major law firms in the venture space and do not include a spousal consent for the 83(b) election in community property states. We also confirmed with our tax counsel, and they confirmed our approach is advisable.&quot;<p>No one should lose sleep over it. Spouse didn&#x27;t sign off on a $500 payment to buy restricted stock (early startup stock), so IRS will come down heavily on you for material harm --- will not stand in court!<p>My 2 cents anyway based on legal advice received.
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TimTheTinker超过 1 年前
Note, this only applies to &quot;early exercise&quot; under 83(b), which is exercising an option grant <i>prior</i> to the grant vesting. More info: <a href="https:&#x2F;&#x2F;carta.com&#x2F;blog&#x2F;early-exercise-stock-options&#x2F;" rel="nofollow">https:&#x2F;&#x2F;carta.com&#x2F;blog&#x2F;early-exercise-stock-options&#x2F;</a><p>Not all startups allow this type of early exercise. If you exercised ISOs&#x2F;NSOs only <i>after</i> they vested, this problem can&#x27;t apply to you.
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pnw超过 1 年前
83b seems like one of the most esoteric and user unfriendly IRS mechanisms ever. There&#x27;s no official form. There&#x27;s no way to file it online. The recommended approach is to use certified mail return receipt which for most people requires a trip to the post office, and in my experience the IRS fails to return them regularly, in which case you are relying on your own records and your copy of the receipt for a potential tax audit many years down the line.<p>You&#x27;d be hard pressed to design a more taxpayer unfriendly process. I thought it was great when Carta automated these because it&#x27;s always been a friction point for myself and founders I&#x27;ve worked with.
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gamblor956超过 1 年前
The IRS generally treats an 83(b) filed by <i>either spouse</i> as jointly filed by the union if they file a joint tax return. Whether they are in a community property state or not is irrelevant from the perspective of <i>federal</i> taxes because the <i>marital joint return</i> already deals with this situation: essentially, the union is treated as a single taxpayer.<p>(And yes, for those of you who are wondering: a federal tax statement&#x2F;election signed by one spouse that files a joint return can bind both spouses for federal tax purposes...)<p>As written, neither 83(b) nor its regulations (specifically 1.83-2, which outlines the requirement for the election) require spousal consent to an 83(b) election, because they are not the person earning the income. The regulations specifically state that the statement is filed by the &quot;person who performed the services.&quot; They then pay taxes pursuant to the 83(b) election with the joint tax return, meaning that <i>both</i> spouses have paid their federal tax liability with respect to any future sale.<p>If this were not the case, the spouses of hundreds of thousands of CA tech workers would owe tens of billions of dollars in back taxes. It would be front page news. But it&#x27;s not, because it&#x27;s not actually how federal taxation works...<p>Note that things get a bit more complicated if the spouses get divorced by the time of the sale of the stock subject to the 83(b) election. Because both spouses (are deemed to have) paid taxes on the 83(b) stock due to the 83(b) election, absent a prenup or postnup generally the 83(b) stock is treated as marital property and the proceeds are similarly marital property to be divided in a divorce. In a community property state, the split is 50&#x2F;50 (I assume the same is true in non-CP states but as I&#x27;ve never dealt with this outside of CA I can&#x27;t say). However, note that it&#x27;s still irrelevant as to whether the other spouse signed the 83(b) election, so long as the election was made while they spouses still filed a joint return.<p>TLDR: for <i>federal</i> tax purposes, not having a spouse sign your 83(b) election is a non-issue, whether or not you live in a community property state.
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khzrt超过 1 年前
I wouldn&#x27;t take chances with the 83(b) election; extra-caution here pays off, just because the stakes are so high. To make founders&#x27; lives easier, we automated the whole process at file83b.com – you can prepare, sign, and file the election online (and include your spouse too if relevant by toggling the form).
unstatusthequo超过 1 年前
A situation where parenthesis make a big difference in the headline. This is not an 83 BILLIION dollar mistake, it&#x27;s referring to 83(b) regulation. Just pointing that out for possible headline correction to de-sensationalize it.
grahamgooch超过 1 年前
Thanks. As a married cofounder myself living in California, if I were to early exercise my own stock options and file the election through Carta, my election could be invalidated by the IRS since my wife did not also sign it. This could lead to very unfavorable tax treatment on my personally held stock.<p>To mitigate these risks, it appears I should advise our general counsel and HR director about this issue with Carta immediately.
_hyn3超过 1 年前
This is a <i>very</i> serious issue for founders in California, Texas, and other community property states.<p>Looks like Gust has the same issue:<p><a href="https:&#x2F;&#x2F;gust.com&#x2F;blog&#x2F;startup-founder-83b-election&#x2F;" rel="nofollow">https:&#x2F;&#x2F;gust.com&#x2F;blog&#x2F;startup-founder-83b-election&#x2F;</a>
everly超过 1 年前
Rough few weeks for Carta
google234123超过 1 年前
Has anyone ever got in actual trouble for this? I doubt…
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renewiltord超过 1 年前
All example 83-b have this problem. Since there is no form and it&#x27;s just a letter, you can just add the line and do it yourself. IANAL.
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