As someone who's been preparing taxes for several years, I'd strongly recommend avoiding the refund transfer route. The complications far outweigh the benefits - you're dealing with third-party processors, additional fees for your client, potential delays, and as others mentioned, the risk of offsets completely derailing payment. I've found the most successful approach is requesting payment upfront for basic preparation work (maybe 50%) and the remainder upon completion but before e-filing. This protects both parties - you get compensated for your time, and they get to review everything before final payment. Most clients understand this is standard business practice, just like any other professional service. The peace of mind is worth way more than the perceived convenience of deducting from their refund!

I've been doing taxes for my neighbors for the past 3 years and learned this lesson the hard way! My first year, I tried the refund transfer route thinking it would be "easier" for everyone. What a nightmare! Between the extra fees, delayed processing, and one client whose refund got intercepted for an old tax debt (leaving me unpaid), I quickly realized it's not worth it. Now I just ask for payment when I hand over their completed return - before I hit submit on the e-file. Most people are totally fine with this since they can see exactly what their refund will be. I use a simple invoice app on my phone and accept Venmo, Zelle, or cash. Way cleaner, no third parties involved, and I sleep better at night knowing I'll actually get paid for my work! Sometimes the old-fashioned way really is the best way.

Just a practical consideration - if your vehicle is pretty old after 7 years of business use, consider if it's worth keeping for personal use at all. I was in a similar situation with a van I used for my plumbing business, facing about $18k in recapture. Instead, I sold it to one of my employees for its fair market value (about $7500) and still had to recapture, but at least I got some cash for it. Then I bought a different used vehicle for personal use that had never been a business asset. Worked out better tax-wise.

One thing that hasn't been mentioned yet is the timing of when you need to establish fair market value for the recapture calculation. The IRS requires you to determine the vehicle's FMV on the exact date you convert it from business to personal use, not when you file your taxes. I'd recommend getting a written appraisal from a qualified appraiser or at least documenting the value with resources like KBB, Edmunds, or NADA guides on the conversion date. Keep screenshots and print copies because you'll need this documentation if the IRS ever questions your recapture calculation. Also, don't forget that once you convert to personal use, you can no longer claim any business deductions for the vehicle - no more depreciation, repairs, insurance, etc. Make sure the timing works with your business needs before making the switch.

Just want to add - make sure to request a "penalty abatement" when you finally reach the IRS! If this is your brother's first time missing a payment deadline for the 2290, the IRS has a "First Time Penalty Abatement" policy that can remove those extra charges. Sounds like the $42 might include penalties and interest that could potentially be removed.

I went through almost the exact same nightmare with my delivery business last year! The key thing that saved me was understanding that CP504B notices are often generated automatically even after you've paid, especially with Form 2290 where there can be significant processing delays. Here's what worked for me: Don't try to make another payment until you confirm whether your September payment was actually processed. Call the Practitioner Priority Service line at 866-860-4259 early in the morning (around 7 AM) - this line typically has shorter wait times than the main taxpayer assistance line. When you do get through, ask them to do a "payment tracer" on your September payment. They can tell you exactly where that money went and whether it was applied correctly. In my case, the payment had been received but was sitting in a suspense account because the reference information wasn't complete. Also, definitely get that authorization form from your brother ASAP. The IRS won't discuss anything without proper authorization, and you're wasting time on calls where they can't help you without it. The CP504B is scary but you typically have at least 30 days from the notice date before any actual levy action, so you have time to sort this out properly rather than panic-paying.

3 Has anyone used the IRS Free File program when transitioning from 1040-NR to 1040? I'm in the same boat and wondering if any of those services handle this state refund situation correctly.

I went through this exact situation two years ago when I transitioned from H-1B to green card status. The key thing to understand is that your state refund is taxable to the extent you received a federal tax benefit from deducting those state taxes on your 1040-NR. Since you were required to itemize on the 1040-NR (no standard deduction available), you almost certainly did receive a tax benefit from the state tax deduction. However, the amount that's taxable might not be the full refund amount if you hit the $10,000 SALT deduction cap. You'll need to do what's called the "tax benefit rule" calculation. Look at your 2023 return and see how much state tax you actually deducted. If it was limited by the SALT cap, then only the portion that provided a benefit is taxable when you receive the refund. The change from nonresident to resident status doesn't affect the taxability of the refund - what matters is whether you got a federal tax benefit in the year you took the deduction. Report the taxable portion on Schedule 1, Line 1 of your 2024 Form 1040.

If you're using TurboTax, be super careful with how you enter this! I had a similar situation and TurboTax completely messed up my self-employed health insurance deduction. It put it on the wrong form and I ended up getting a nasty letter from the IRS.

I'm dealing with a very similar situation right now! I have W-2 income with employer health insurance for myself, but my spouse is on a separate marketplace plan because adding them to my employer plan would cost way more than their individual coverage. I also have an LLC (elected S-Corp) from freelance work. From what I've researched, the key issue is whether your employer coverage "could have" covered your family members, regardless of cost. This is where it gets tricky - technically your employer offers family coverage, even though it's unreasonably expensive at $950/month. Some tax professionals argue that if the employer coverage is prohibitively expensive compared to marketplace alternatives, you can still claim the self-employed health insurance deduction. Others take a more conservative approach and say any availability of employer family coverage disqualifies you. I'd definitely recommend getting professional advice on this specific situation since the IRS guidance isn't crystal clear on what constitutes "reasonably available" employer coverage. The potential tax savings are significant, but you want to make sure you're on solid ground if questioned.