5 Tax Mistakes Fintech Founders Make After a Series A

Key Takeaways

• Equity compensation (RSUs, stock options) has specific tax treatment that most founders don't optimize
• The 83(b) election must be filed within 30 days of grant or you lose it forever
• Alternative Minimum Tax (AMT) can hit you years before you see cash from stock options
• Cross-border taxation affects international teams, not just founders
• Exit timing decisions can save (or cost) you millions in capital gains taxes

---

Fintech raised $42.8 billion in VC deals in 2025, according to industry reports. That's a lot of wealth being created. But here's what I see over and over: founders crushing it on the product side, getting wrecked on the tax side.

I work with founders who've just closed their Series A, and the same five mistakes keep showing up. Let's fix them.

What Should Fintech Founders Know About Equity Compensation Tax Treatment?

Your equity comp (stock options, RSUs, restricted stock) is taxed differently than your salary, and most CPAs who don't specialize in startups get this wrong.

Here's the breakdown:

• Incentive Stock Options (ISOs): No tax at grant or exercise (usually), but AMT can hit you. Tax due when you sell the stock, treated as long-term capital gains if you hold 2+ years from grant and 1+ year from exercise.
• Non-Qualified Stock Options (NSOs): Ordinary income tax at exercise (even if you don't sell). You pay tax on the spread between exercise price and fair market value.
• Restricted Stock Units (RSUs): Taxed as ordinary income when they vest. No way around it.

Common mistake: Founders exercise NSOs without realizing they owe taxes immediately, even though they haven't sold shares. Then they get a massive tax bill with no cash to pay it.

What to do instead: Model out your tax liability BEFORE exercising. Sometimes it makes sense to wait, sometimes it makes sense to exercise early and pay the tax. It depends on your cash flow, the company's valuation trajectory, and your AMT situation.

Why Does the 83(b) Election Matter So Much?

The 83(b) election is a tax form you file with the IRS within 30 days of receiving restricted stock. If you miss that window, you can't go back.

Here's why it matters: Let's say you get 100,000 shares of restricted stock worth $0.01 per share at grant (total value $1,000). Without an 83(b) election, you pay ordinary income tax on the value AS IT VESTS. If the stock is worth $10 per share when it vests four years later, you owe tax on $1 million (100,000 shares x $10), even if you haven't sold a single share.

With an 83(b) election, you pay tax on the $1,000 value at grant. Then when you sell the stock years later, the entire gain is taxed as long-term capital gains (lower rate).

Real example from a fintech founder I worked with: Forgot to file 83(b) on early stock. Company went from $5M to $150M valuation. Vesting triggered a $400K tax bill with no liquidity event. Brutal.

What to do: File 83(b) within 30 days of every restricted stock grant. Send it certified mail to the IRS and keep a copy. This is non-negotiable.

How Does Alternative Minimum Tax (AMT) Affect Stock Option Exercises?

AMT is a parallel tax system designed to make sure high earners pay at least some tax. For ISO exercises, the spread between exercise price and fair market value is an AMT preference item.

Translation: You can owe AMT even if you haven't sold the stock yet.

Example: You exercise ISOs when the fair market value is $10/share and your exercise price is $1/share. You have a $9/share spread. If you exercise 50,000 shares, that's a $450,000 AMT preference item. Depending on your income, you could owe $100K+ in AMT.

According to IRS Publication 525, AMT can be recovered as a credit in future years, but only if your regular tax exceeds AMT in those years. Not guaranteed.

What to do: Run AMT projections before exercising ISOs. Sometimes it makes sense to exercise smaller batches over multiple years to stay below AMT thresholds. Sometimes you're better off letting options expire and waiting for a liquidity event.

What Are the Cross-Border Tax Issues for Fintech Founders?

If you have team members, contractors, or co-founders outside the U.S., you're dealing with cross-border taxation. This affects payroll, equity grants, and even where your company is domiciled.

Key issues:

• Foreign contractors: Are they actually employees under local law? Misclassification can trigger penalties.
• Equity grants to non-U.S. team members: Tax treatment varies by country. Some countries tax at grant, some at vest, some at sale.
• Permanent establishment risk: If you have employees working abroad, you might trigger corporate tax obligations in that country.
• Transfer pricing: If you're moving IP or revenue between entities in different countries, you need documentation to justify pricing.

What to do: Work with a CPA who specializes in international tax. This is not a DIY area. The penalties for getting it wrong are severe.

How Should Fintech Founders Think About Exit Timing for Tax Optimization?

When you sell your company or take it public, the timing of your stock sales can make a multi-million-dollar difference in taxes.

Key strategies:

• Qualified Small Business Stock (QSBS): If you hold stock in a C-corp for 5+ years, you can exclude up to $10 million in capital gains (or 10x your basis, whichever is greater) under Section 1202 of the tax code. This is huge for early employees and founders.
• Long-term vs short-term capital gains: Long-term (held 1+ years) is taxed at 0%, 15%, or 20% depending on income. Short-term is taxed as ordinary income (up to 37%). Selling one month earlier can cost you 17% more in taxes.
• State taxes: California charges 13.3% on capital gains. If you're planning an exit, moving to a no-income-tax state (Texas, Florida, Nevada, Washington) before the sale can save millions. But you need to establish residency BEFORE the liquidity event, or the state will argue you moved for tax avoidance.

Real scenario: Fintech founder moved from California to Texas six months before acquisition closed. Saved $2.1 million in state taxes on a $16M exit. California tried to argue it was tax avoidance, but he had documentation proving genuine relocation (new apartment, utility bills, gym membership, voter registration).

What to do: Plan your exit at least 12 months in advance. Talk to a tax attorney about residency requirements, QSBS eligibility, and AMT recovery strategies.

Summary

Fintech founders are building incredible companies, but tax planning is not optional. The five mistakes above cost founders millions every year:

1. Not understanding how different equity types are taxed
2. Missing the 83(b) election deadline
3. Ignoring AMT when exercising ISOs
4. Underestimating cross-border tax complexity
5. Poor exit timing that leaves money on the table

The good news? All of these are fixable with planning. The bad news? You can't go back and redo an 83(b) election or change when you sold stock.

If you're a fintech founder who just raised a Series A (or planning to), let's talk. I work with founders navigating exactly these issues.

Sources:

• IRS Publication 525 (Taxable and Nontaxable Income)
• Section 1202 (Qualified Small Business Stock)
• 2025 fintech VC data (industry reports)