Citing electronic filing complications from having to submit the copy of a §83(b) election with the service provider’s return, the IRS has issued proposed regulations (REG-135524-14) that would modify Reg. §1.83-2(c) to remove the requirement that a copy of the election be submitted with the service provider’s tax return for the year in question.
As well, the proposed regulations provide that taxpayers may elect to rely on these regulations for any property transferred on or after January 1, 2015 pending the issuance of final regulations. Note that this will not cover 2014 calendar year returns (where the attachment is still required) but will cover 2015 calendar year returns.
The IRS described the problem with the election as follows:
In recent years, it has come to the attention of the IRS that many taxpayers who wish to electronically file (e-file) their annual income tax return have been unable to do so because of the requirement in §1.83-2(c) that they submit a copy of their section 83(b) election with their income tax return. Commercial software available for e-filing income tax returns does not consistently provide a mechanism for submitting a section 83(b) election with an individual's e-filed return. As a result, an individual who has made a section 83(b) election may be unable to e-file his or her return and at the same time comply with the requirement in §1.83-2(c) that a copy of the section 83(b) election be submitted with the return. An individual who made a section 83(b) election would be required to paper file his or her income tax return to comply with the requirements under §1.83-2(c).
Thus the preamble goes on to note:
In order to remove this obstacle to e-filing an individual tax return, the proposed regulations would eliminate the requirement under §1.83-2(c) that a copy of the section 83(b) election be submitted with an individual's tax return for the year the property is transferred. As described in this preamble, section 83(b)(2) requires that an election made under section 83(b) be filed with the IRS no later than 30 days after the date that the property is transferred to the service provider. This statutory requirement provides the IRS with the original section 83(b) election. Section 83(b) elections are scanned by the service center receiving the election, and an electronic copy of the election is generated. The creation of this electronic copy of the section 83(b) election eliminates the need for a taxpayer to submit a copy of the section 83(b) election with his or her individual tax return.