Form 83(b) is an optional form filed with the IRS that allows you to claim the taxable income of restricted stock on the grant date, rather than the vesting date. In some circumstances, this can be a significant tax savings, allowing you to achieve capital gains tax rates on all the appreciation, instead of only the appreciation amount after the vesting schedule requirement has been met.
Employee stock awards come in various forms, each with its unique features and benefits. Whether through stock options, restricted stock units, employee stock purchase plans, performance stock awards, or phantom stock, companies have a range of tools at their disposal to motivate and reward their workforce.
When a portion of your compensation is in the form of shares of stock, it often leads to a large percentage of net worth being dependent on the performance of one company’s stock price. For this reason, careful investment planning is necessary for anyone receiving equity compensation.