Employer Unaware of 83(b) election

[Guest enelson]

Has anyone had any experience with an employee failing to notify the employer that he had filed an 83(B) election and the consequences of such failure for the employer and the employee? In our situation, the employer was not notified that an employee had filed an 83(B) election; therefore, the employer failed to report W2 taxable income for the employee, and the employee failed to pay taxes for such income. How does the employer correct this mistake? What are the tax consequences for the employer and the employee in this situation? Thanks.

[mbozek]

Under IRC a Section 83(B) election must be made within 30 days after the property is transferred with the IRS office where the taxpayer files his return and one copy is to be submitted with the tax return. The taxpayer is also to submit a copy of the notice to the person for whom the services are performed. See Reg 1.83-2 Your client needs to retain a tax advisor to determine whether the failure to submit the notice to the ER negates the election.

[Guest enelson]

Thank you for your response. If we assume that the employee's failure to notify the employer does not negate the election and the employee filed the election within 30 days of the transfer, (thus the election is valid) what steps would you suggest the employer take to remedy its failure to include the property in the employee's gross income? Thanks for your assistance.

[mbozek]

As I said previously the employee needs to retain a tax advisor to determine what are the options, e.g., can the employer be notified late. I did not say that the failure to notify the employer on time could be remedied now. The advisor will have to review the precedents to see if there is a way to provide the notice to the employer now in order for the employer to issue a revised w-2 for 2002.

[Guest enelson]

Thank you for your assistance.