Just a warning - I tried something similar and got audited. The IRS questioned whether the loan was ever legitimate or if it was always intended as an investment. They also scrutinized whether the company was already worthless before the conversion. Make sure you have documentation showing it was a real loan with repayment terms, interest, etc., and that the company still had SOME value at conversion time.

This is exactly the kind of complex tax situation where you really need proper documentation and timing. Based on what others have shared, it sounds like Section 1244 treatment is possible but there are several critical requirements you need to meet. From my understanding, the key issues are: 1) The company needs to formally designate the converted shares as Section 1244 stock in their corporate records, 2) The conversion needs to happen while the company still has some minimal value (even if it's failing), 3) You need proper documentation of the original loan terms, and 4) The company must meet the capitalization requirements (under $1M total). Since your friend's company has shut down operations but hasn't formally dissolved yet, you might still be within the window to make this work. I'd strongly recommend getting professional tax advice before proceeding though - the audit risk mentioned by others is real, and the IRS will scrutinize these types of transactions closely. Have you verified that the startup meets all the Section 1244 requirements, particularly the total capitalization limit?

Has anyone calculated roughly how much you need to set aside from these 1099 payments? I just got asked to fill out W9 too for my DJ side gig and I'm trying to budget.

The key thing to understand is that you were already legally required to report and pay taxes on this income, even when it was paid in cash or Venmo. The W9 doesn't change your tax obligation - it just means the company is now going to properly report what they pay you to the IRS. You can't really refuse to fill out the W9 if you want to keep working for them. Companies are required to get this form from contractors they pay $600+ per year. If you refuse, they'll likely stop using your services or withhold 24% backup withholding from your payments. Start setting aside about 25-30% of what you earn going forward for taxes. You'll owe self-employment tax (15.3%) plus regular income tax on the net profit. But the good news is you can deduct all your legitimate business expenses - tools, materials, vehicle expenses for driving to jobs, work clothes, etc. These deductions can significantly reduce what you actually owe. Consider making quarterly estimated tax payments to avoid penalties. And definitely start keeping detailed records of all your work-related expenses from now on!

Pro tip: sign up for informed delivery with USPS so you know when its coming

I went through this exact same situation last year! The IRS rejected my direct deposit due to a closed account and it took about 3 weeks to get the paper check. Just make sure to track it with informed delivery like @Diego mentioned - that really helped ease my anxiety knowing it was on the way. The waiting is the worst part but it will come!

Another tip - if your amended return involves a substantial refund, consider filing Form 911 (Taxpayer Advocate Service request) after the 20-week mark. The Taxpayer Advocate can sometimes help if you're experiencing financial hardship due to the delay. They won't help just because of a long wait, but if you can demonstrate actual financial hardship, they might be able to expedite things.

I'm going through the exact same thing! Filed my amended return in August and it's now been over 4 months with just "received" status. What's really frustrating is that the IRS changed those rules so late in the game - it feels like they should prioritize processing returns that were amended because of THEIR rule changes. Based on what everyone's sharing here, it sounds like the key is figuring out if there's a specific issue holding up your return rather than just waiting blindly. The taxr.ai tool that @Jamal Thompson mentioned sounds interesting for identifying potential problems, and the Claimyr service for actually getting through to talk to someone seems worth trying if you're past the 16-week mark. @Carmen Reyes - since you mentioned needing the refund for home repairs, you might want to look into the Taxpayer Advocate Service (Form 911) that @Fatima Al-Mazrouei suggested if you can demonstrate financial hardship. September to now is already hitting that 20+ week timeframe where they might be able to help.

Has anyone noticed that amended returns involving the Recovery Rebate Credit or Earned Income Credit seem to take way longer? My friend and I both filed amendments in February, but mine had the EIC correction and is still processing while hers was just fixing income reporting and she got her refund weeks ago.

I'm in almost the exact same situation! Filed my amended return on February 15th and still showing "received" status with no movement. It's reassuring to hear from others with similar timelines - I was starting to think something went wrong with my filing. Based on what everyone's sharing here, it sounds like 12-16 weeks is pretty normal, especially if there are any credits or complex changes involved. My amendment was for adding a missed 1099-INT, so hopefully that's straightforward enough to process soon. The batching theory makes a lot of sense - probably explains why some people filed days apart but got completely different processing times. Going to try to stop checking the tool daily since it seems like it won't update until everything is completely done anyway. Thanks for posting this question, it's helpful to know we're not alone in the waiting game!