IRS Continues to Extend Key Filing Deadlines in Response to COVID-19

On April 9. 2020, the Internal Revenue Service (the “IRS”) issued Notice 2020-23, which extends a number of key filing deadlines in the wake of the COVID-19 pandemic.  The guidance provides welcome relief to individuals and plan sponsors who must perform certain “time-sensitive actions” on or after April 1, 2020 and before July 15, 2020.  For Notice 2020-23 purposes, “time-sensitive actions” are described, in part, in Revenue Procedure 2018-58, and include key filings such as Forms 5500, 990, and Section 83(b) elections.  Because the relief is provided only for filings due during the period from April 1, 2020 to July 15, 2020, certain individuals and plan sponsors will remain subject to normal filing deadlines.  Read More ›

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Proposed IRS Regulations Simplify Section 83(b) Filing Requirements

As explained in a prior blog post, an employee who timely files a Section 83(b) election will be taxed on the fair market value of property transferred (typically restricted stock) to him or her in exchange for services on the date of grant rather than as the stock vests.  In addition, by making a Section 83(b) election, the employee will start the clock on the capital gains holding period. The Section 83(b) election must be filed with the Internal Revenue Service within 30 days from the date on which the property is transferred to the employee.  In addition, the employee is required to provide a copy of the 83(b) election to his or her employer and must attach a copy of the election to his or her individual tax return for the year in which the election is made. Read More ›

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The Importance of Section 83(b) Elections for New Companies

Many start-up companies reward their employees with restricted stock subject to time-based (or performance-based) vesting restrictions.  What we sometimes find is that the start-up company and the employee do not fully appreciate the tax implications of a restricted stock award and the potential benefits of a timely filed Section 83(b) election.

Section 83 of the Code generally provides that restricted stock becomes taxable to the employee as the stock vests.  Accordingly, on each vesting date, the employee will recognize ordinary taxable income in an amount equal to the fair market value of the stock, less any amount the employee paid for the stock.  Read More ›

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