11 Quick warning about the home office deduction - be careful with claiming this if you don't have a space that's EXCLUSIVELY used for business. The IRS is pretty strict about this. If you're just selling from your couch or bedroom that you also use for personal stuff, you probably can't claim it. Also, if you're making under $5k from this side hustle, consider if the home office deduction is worth it. Sometimes it can trigger more scrutiny than it's worth for a small business.

Great question! Yes, you can definitely claim business deductions for your reselling activities. Since you're making regular income ($300-400/month), the IRS would likely consider this a business rather than just casual selling of personal items. Key deductions you can claim include: - Home office space (must be used exclusively for business) - Business equipment (printer, phone, computer) - Shipping supplies and packaging materials - Mileage to/from post office or sourcing locations - Storage containers/organization supplies - Photography equipment for product photos - Portion of internet and phone bills used for business You'll report this on Schedule C with your tax return. Just make sure to keep detailed records of all expenses and sales throughout the year - don't wait until tax time! Also, separate your business activities from personal use as much as possible to support your deductions. Since you're making consistent income, it's definitely worth setting up proper bookkeeping now rather than trying to reconstruct everything later. The tax savings will likely make the extra organization worthwhile!

I'm going through this exact same S-Corp election nightmare and this thread has been incredibly helpful! Filed our Form 2553 in March and have been stuck in the same IRS phone hell for months with no CP261. Reading through everyone's experiences has given me a clear action plan. I'm definitely going to try the multi-pronged approach that's worked for several people here: filing Form 911 with TAS, sending a certified letter to Cincinnati, and using the strategic language tips when calling. One thing I wanted to add - I just discovered that if you have an IRS online business account, you can sometimes view your entity classification status there even when phone reps claim they can't find anything. It's worth checking before going through all the other steps, as it might save you weeks of waiting. Also, for anyone still struggling with this, I learned that when you call and get the usual "we need to transfer you" response, always ask for the direct callback number of the department they're sending you to. If you get disconnected (which happens constantly), you can call back directly instead of starting over with the main line. The success stories from Dmitry, Victoria, and others prove that persistence across multiple channels really works. Starting my Form 911 today and getting that certified letter ready for Cincinnati. Thanks to everyone who shared their solutions - this community support makes dealing with IRS bureaucracy so much more manageable!

I'm currently going through this exact same S-Corp election nightmare! Filed Form 2553 back in February and have been stuck in the same endless phone loop with the IRS for over two months now. Never received the CP261 and getting absolutely nowhere with customer service. This thread has been a complete lifesaver - it's both frustrating and reassuring to see how widespread this issue is. The multi-pronged approach that Dmitry, Victoria, and others have had success with gives me real hope that there's actually a path through this bureaucratic maze. I'm planning to file Form 911 with TAS immediately, send that certified letter to the Cincinnati office, and use all the strategic calling tips everyone has shared. The "entity determination" language and asking for "Entity Classification Election Acknowledgment" are brilliant approaches I never would have thought of. One thing I wanted to add - my tax preparer mentioned that we should also request a "business master file transcript" when calling, as sometimes S-Corp elections appear there even when reps claim they can't find the original Form 2553. It's yet another angle to try when you're on the phone with them. Starting my documentation log today (wish I'd been doing this from day one!) and preparing all my applications. Thanks to everyone who shared their experiences and solutions - this community has created an amazing roadmap for dealing with what seems to be a systemic IRS problem. Hopefully I'll be reporting back with good news soon!

My two cents - I think you're focusing on the wrong thing. S-Corp is the only real way to dramatically cut SE tax. I switched from sole proprietor to S-Corp once I hit about $75k profit and saved over $4k in SE taxes the first year. Basic math: You pay yourself a "reasonable salary" which is subject to FICA (basically SE tax), but any profit above that comes to you as distributions with NO SE tax. The trick is determining what's "reasonable" - too low and IRS might come calling. Yes, there's more paperwork and you'll pay some money for payroll processing, but at $2400 SE tax, you could likely cut that in half with an S-Corp. Talk to a CPA about this specifically - it's the #1 tax planning move for successful self-employed folks.

I'm in a similar boat with SE tax being a major pain point! Based on what I'm reading here, it sounds like the key insight is that retirement accounts (traditional IRAs, Roth IRAs, SEP IRAs) help with income tax but don't touch self-employment tax at all. The HSA option mentioned by Ava is really interesting - I had no idea those contributions actually reduce SE tax too. That could be a game-changer if you qualify for a high-deductible health plan. For your situation with $2,400 in SE tax, it sounds like you might be making around $15,000-16,000 in net self-employment income (since SE tax is roughly 15.3%). At that level, the S-Corp route might not make financial sense due to the setup and ongoing costs Emily mentioned. I'd focus on: 1) maximizing business deductions to reduce net profit (which directly reduces SE tax), 2) looking into HSA if you can get an HDHP, and 3) maybe having that conversation with the IRS through one of the services mentioned to get official guidance on your specific situation. The retirement accounts are still great for reducing your overall tax burden, but unfortunately won't help with that SE tax piece you're trying to solve.

As someone who went through this exact confusion last year, I can confirm what others have said - keep Section 199A dividends and USGO calculations completely separate. I made the mistake of applying my Treasury money market fund's 98% USGO percentage to ALL dividends including the Section 199A amounts, which was wrong. Section 199A dividends (Box 5 on your 1099-DIV) are already classified for their specific tax treatment and shouldn't be adjusted with USGO percentages. The key insight that helped me: USGO is about WHERE the income came from (federal obligations vs other sources), while Section 199A is about WHAT TYPE of business income it represents (qualifying business income from REITs, etc.). They're answering different tax questions. For your SPTXX example with 75% government obligations, apply that percentage only to the amounts in Box 1a and 1b, not to any Section 199A amounts that might also be reported from that same fund.

This has been an incredibly helpful thread! I've been struggling with this exact same issue for weeks. Like many of you, I have a mix of government money market funds and REIT investments, and I was completely confused about how to handle the different dividend types. What really helped me understand was the distinction that @Zainab Abdulrahman made about USGO being about WHERE the income came from versus Section 199A being about WHAT TYPE of income it represents. I was making the same mistake of trying to apply USGO percentages to everything. After reading through all these responses, I went back and rechecked my calculations. I had been incorrectly applying my Vanguard Federal Money Market Fund's 95% USGO percentage to the Section 199A dividends from my REIT holdings that were also in my account. Now I understand that the Section 199A amounts (Box 5) should be left alone for the qualified business income deduction, while only the regular dividends (Box 1a/1b) get the USGO adjustment for state tax purposes. Thanks everyone for sharing your experiences and clarifying this confusing intersection of tax rules!

Just wanted to add my experience as someone who went through this exact same thing a few months ago! Got the same "60-day accuracy review" message and was completely stressed about it. Mine ended up resolving in about 3 weeks, way faster than the 60 days they warned about. The key thing that helped me was understanding that this review is actually pretty routine - the IRS runs these on a certain percentage of returns every year, especially if there are any minor data matching issues between your return and what employers/banks reported. It's not necessarily a red flag that something's wrong with your taxes. One tip: screenshot that status page for your records, just in case. And definitely don't call the IRS like the message says - you'll just waste hours on hold for them to tell you the same thing the website already told you. For California specifically (saw you mentioned that in the comments), your state refund should process completely separately. CA doesn't typically hold up state refunds for federal reviews unless there's a specific garnishment or legal issue involved. Try not to stress too much - I know it's easier said than done when you're counting on that money! But statistically speaking, the vast majority of these reviews end with the refund being released without any problems. Just keep checking back every few days and it should update soon 🤞

Going through the same thing right now and honestly it's nerve-wracking! The 60-day message is so vague and scary when you're expecting that refund. Reading through everyone's experiences here is actually super helpful though - seems like most people get their money way before that 60-day deadline. I'm curious about one thing - for those who went through this review, did your "Where's My Refund" status ever show any intermediate updates between "Return Received" and "Refund Approved"? Or does it just sit there looking the same until suddenly it jumps to approved? Also appreciate everyone confirming that state refunds process separately. Was definitely worried about both getting held up but sounds like I should still expect my state refund on the normal timeline. The waiting game is brutal but at least knowing other people have been through this exact same situation and came out fine on the other side helps a lot! 🤞