Can I file an 83(b) election on RSUs instead?

No. §83(b) requires a transfer of property, and Treas. Reg. §1.83-3(e) treats an unvested RSU as an unfunded promise to deliver shares later rather than property, so there is nothing to elect on. Form 15620 covers 83(b) elections on restricted stock and early-exercised options, not RSUs. An 83(b) filed on an RSU has no legal effect and only creates confusion with the employer's payroll team.

Will a section 83(i) election trigger an audit?

No. It is a statutory election Congress added in 2017 and the IRS implemented in Notice 2018-97, and making it is not a red flag. The real exposure is eligibility, not audit: an election made when the employer is not an eligible corporation is simply void, the income was taxable at vesting all along, and you can end up owing that tax plus interest under §6601 on a deferral that never existed.

How do I know whether my employer offers qualified equity grants?

§83(i)(6) requires the employer to notify you at the time the income would first be includible and to state that the deferred amount is measured at the vest-date value. No notice usually means no program. The penalty for skipping the notice is $100 per failure capped at $50,000 per calendar year under §6652(p), which is small enough that many employers simply never set the program up.

What happens to my deferral if the company goes public?

It ends. Under §83(i)(1)(B), the first date any stock of the corporation becomes readily tradable on an established securities market is an inclusion event, so the income lands in that year at the original vest-date value. A post-IPO lockup does not extend the deferral, which can leave you paying tax in a year when you still cannot sell the shares.

Do I still owe Social Security and Medicare tax if I make the election?

Yes, in the vesting year. §83(i) defers federal income tax only, and the 2017 act made no change to the FICA rules, so payroll tax is due when the income would have been taxed without the election. In the example above that is $2,636 of Medicare tax at vest, with no Social Security because the salary already passed the $184,500 wage base for 2026.

The Journal / Equity Compensation

Defer Taxes on Private Company RSUs: The Section 83(i) Election Almost Nobody Can Use.

By Ewan Morkel, EAJuly 28, 20266 min read

IRC §83(i) lets a qualified employee defer federal income tax on vested private company stock for up to 5 years. The 80% employee rule and a mandatory escrow keep most plans out, and the deferral locks in the vest-date value even if the shares fall to a quarter of it.

Financial charts displayed on a laptop beside printed analysis

A backend engineer at a Series C company watches 8,000 restricted stock units settle in March. No tender offer, no IPO date, no way to sell a share. The 409A value is $14.50, so $116,000 lands on the W-2 as ordinary wages. The stock cannot pay rent and the tax is real. So can you defer taxes on private company RSUs until there is actually a market? There is a Code section written for exactly this, and almost nobody gets to use it.

The problem

Why private company RSUs create tax with no cash.

§83(a) taxes stock when it is transferred and substantially vested, measured at fair market value. At a private company that value is the most recent 409A appraisal, and it is the number that lands on the W-2. An RSU also cannot be pre-taxed the way restricted stock can: an 83(b) election needs a transfer of property, and Treas. Reg. §1.83-3(e) treats an unfunded promise to deliver shares later as something else. The 83(b) election does not reach RSUs at all.

Companies solved this for a while with double-trigger vesting, where units settle only once both a service condition and a liquidity event are met, so there is no income until there is a market. Single-trigger RSUs settle on the vesting date alone, taxable whether or not anyone can sell. If your grant is single-trigger, §83(i) is the only federal relief written for the problem.

The election

What a section 83(i) election actually does.

The 2017 tax act added §83(i) and the 2025 act left it alone, so it is permanent law. A qualified employee elects within 30 days of the first date the shares are transferable or no longer subject to a substantial risk of forfeiture, whichever comes first, in a manner similar to an 83(b) election. There is no IRS form: Form 15620 covers 83(b) elections only, so this one is a written statement filed with the Service and copied to the employer. Under §83(i)(1)(B) the deferral ends early on the first of five events:

The stock becomes transferable, including transferable back to the employer
You become an excluded employee
Any stock of the company becomes readily tradable on an established securities market, which is what an IPO does
5 years pass from the first date your rights in the stock vested or became transferable
You revoke the election

Excluded employee is broader than it sounds. §83(i)(3)(B) covers any 1% owner in the current year or the 10 preceding calendar years, anyone who has ever been chief executive officer or chief financial officer or acted in that capacity, family members of those officers under §318(a)(1), and any of the 4 highest compensated officers for the year or the 10 before it. A promotion into the top four ends the deferral and accelerates the whole bill.

The gate

The 80% rule that keeps most plans out.

Deferral is available only from an eligible corporation. Under §83(i)(2)(C) that means no stock readily tradable on an established securities market in any preceding calendar year, plus a written plan granting at least 80% of US employees stock options, or RSUs, with the same rights and privileges. Notice 2018-97 tightened every ambiguity there. The test runs per calendar year with no carryover, employees working under 30 hours a week drop out of the denominator, and it has to be all options or all RSUs. A company that gives options to engineers and RSUs to the sales team in the same year fails, even if every employee got something.

Then there is the escrow. Notice 2018-97 requires the employer to hold the deferral stock in escrow to satisfy withholding when the deferral ends, and makes entering that arrangement a condition of being a qualified employee. That handed employers a clean opt-out: no escrow, no election. Most take it, and §83(i) has been close to a dead letter since 2018.

8,000 single-trigger RSUs settling at a $14.50 409A value, 2026.

Shares settled at vest, 409A value $14.50: 8,000
Ordinary income under §83(a) at vest: $116,000
W-2 salary before the RSUs: $190,000
Federal income tax on the RSU income (24%, 32%, and 35% brackets): $35,900
Medicare 1.45% plus the 0.9% additional tax on wages over $200,000: $2,636
Total federal tax at vest with no election: $38,536
Deferred by a §83(i) election: $35,900
Still due at vest with the election, because FICA is not deferred: $2,636
Withheld when the deferral ends: §3402(t) maximum rate of 37%: $42,920
Income reported when the deferral ends, whatever the shares are worth then: $116,000

Tax year 2026, single filer, $190,000 of salary, the $16,100 standard deduction, and no state tax. Salary alone exceeds the $184,500 Social Security wage base, so the RSU income carries Medicare tax only. Bracket thresholds are the 2026 amounts in Rev. Proc. 2025-32.

The trap

Deferral locks in the vest-date value.

The amount you eventually include is the §83(a) amount measured at vesting. If the 409A value was $14.50 when the shares settled and $4 when the deferral ends, you still report $116,000 and pay about $35,900 of federal income tax on stock worth $32,000. It is the RSU tax trap when the stock drops, stretched across 5 years and applied to shares with no market along the way. §83(i)(6) makes the employer put that warning in writing before you elect.

Two costs sit outside the deferral. FICA is not deferred, because the 2017 act changed nothing in the payroll tax chapters, so Social Security and Medicare come due in the year the income would otherwise have been taxed. And when the deferral ends, §3401(i) treats the stock as wages and §3402(t) requires withholding at the maximum rate under §1, 37% for 2026, ignoring your Form W-4. On $116,000 that is $42,920 withheld against $35,900 of real tax.

The verdict

What to ask, and what to do when the answer is no.

Start with one question to whoever administers your equity: is this a qualified equity grant program under §83(i), and does the escrow exist? If either answer is no, the election does not exist for you and no filing creates it. Most of the time the answer is no. When it is yes, elect if you expect the company's value to hold or climb, because you are moving $35,900 five years out at no cost. Skip it if you think the 409A has peaked, since the deferral cannot shrink the income and can easily outlast the value.

When §83(i) is off the table, the remaining fixes are unglamorous. Ask whether the grant can be written double-trigger before you sign it. If you hold options rather than units, early exercise plus a timely 83(b) election does the same job with far fewer conditions. And if single-trigger shares are already vesting, what is left is cash planning: 22% supplemental withholding on $116,000 is $25,520 against $35,900 of tax, so roughly $10,400 comes due with the return, and an estimated payment in the vesting quarter keeps the §6654 penalty off it.