• May 2019
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How do you file an election 83(b) form/statement to the IRS for a foreign founder that has no SSN? Do we have to somehow register these founders with the IRS before they are granted restricted stock?

Since filing an 83b election can result in significant tax savings, it makes sense that you are interested in filing this document even for non-US founders. But, depending on the particulars of your circumstances, filing this document may not do anything at all.

The determining factor in filing this document comes down to future intentions. Where will you continue to live moving forward? Are you planning on moving to the US or staying in your home country?

It is important to draw a distinction between non-US citizens who are nevertheless US taxpayers and those who live abroad. If you are a resident alien in the US, you are probably a US taxpayer. You can, and should, file an 83B election with the IRS. If you are not a U.S. taxpayer, however, the answer is not as clear.

If you are a non-US founder and you are not living in the US, you are probably a taxpayer in your country of residence. In this case, your best tax strategy will depend on your local tax regime. In this instance, I highly recommend discussing this with a tax advisor or attorney in your home country.

Since the 83b does not really help non-US taxpayers, many startups prefer not to grant restricted stock awards to non-resident aliens. Instead, they opt for granting deferred stock (or restricted stock units) to foreign founders. This is, essentially, an unfunded promise to deliver stock to the founder/employee at the end of the vesting period.

If, however, you or your company does decide to grant restricted stock option awards to a non-US founder, whether or not you need to file an 83B election depends on the likelihood that you will be relocating to the U.S. within the vesting period. Where will you continue to pay your taxes – your home country versus the US.

This article  digs deeper into the topic.

If you’d like some assistance or to chat with a knowledgeable tax attorney, LawTrades can help you out.

Hope this helps!