Small financial mistakes lead to big losses

I’ll never forget one phone conversation I had early on in my Secfi career. My then CEO added me to the provide some expertise around the tax side for a potential client. He was an early employee at Pinterest and helped build the company. He had exercised his stock options early and was planning around the IPO.

When my CEO heard that, he asked whether he had filed a 83(b) election with the IRS which effectively tells them to tax him now when the tax is $0. The call goes silent and it was immediately clear that no one on this person’s team knew whether they had or not. I won’t go into specifics of the details, but let’s just say he was a lot less wealthy because of some simple paperwork he neglected to file.

You only have 30 days after exercise to file the 83(b) and it can mean the difference between a $0 tax bill and large one if and when your company exits.

I’ll be filing 2x 83(b) elections for a couple of my angel investments today. Every time I file one, I think about these small financial mistakes or oversights that lead to a huge amount of money lost.