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83(b) Election Across Calendar Year

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Not sure this is the right forum, but I'm curious how this situation would be addressed.

A privately held employer issues restricted stock to an employee on December 20, 2021. It is subject to a five-year cliff vest. The employee's last 2021 paycheck is December 31, 2021. There is no other procedure imposed during 2021 for income tax withholding or FICA, because nothing has vested and the employee has not made an 83(b) election so nothing is taxable. The employee files an 83(b) election on January 10, 2022. The employee's next paycheck is paid on January 15, 2022. 

Regardless of whether the employer withholds income tax and FICA from the January 15, 2022, paycheck or the employee writes the company a check for withholding on January 10, 2022, how would the employee's W-2 and the employer's 941s (4Q21 and 1Q22) look? 

On the W-2, the income can still be reported in box 1, 3, and 5 for 2021, but what would be reported for income tax and FICA withholding?

On the 941, would the wages and FICA be reported all in 4Q21 (the quarter in which the income was received), all in 1Q22 (the quarter in which the election was made), or some of both (the income reported in 4Q21 and withholding reported in 1Q22)?

Would appreciate any help.

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EBECatty, I have wondered about this myself. The regs (1.83-2(a)) tell you that the date of income inclusion is the year of the transfer, so here December 20, 2021. That of course would mean that the W-2 for 2021 would include the income. I would think the same for the 941.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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