That's really helpful to know! Did you use a tax professional or did you file yourself? I'm in the same boat but nervous about doing it wrong.

This is really reassuring to hear from someone who's actually been through this exact situation! I'm in a similar spot with health issues taking priority over work right now. Just to clarify - when you resumed filing and claimed those losses, did you need any special documentation beyond your old Schedule D? I'm wondering if I should also keep my brokerage statements from the year I realized the losses, just in case the IRS wants to see the original transaction details.

I need to jump in here because this suggestion could lead to audit trouble. The IRS is very clear that expenses must be allocated properly between different activities. You can't take expenses that are clearly related to your W2 job and artificially assign them to a side business just to get a deduction. If you have a legitimate side business, then yes, you can deduct expenses that are actually for that business. But creating a side business just to deduct W2 expenses, or improperly allocating W2 job expenses to a side business, could be considered tax fraud.

Sorry, I should have been clearer. I wasn't suggesting creating a fake business or misallocating expenses! I meant that if OP already has a legitimate side business, some expenses that benefit both activities (like a cell phone used for both) could have the appropriate portion allocated to the side business. Many salespeople I know do have side gigs like consulting or training, and properly allocating shared expenses is totally legitimate. But you're absolutely right that you can't just make up a business or improperly allocate expenses that are purely for your W2 job.

This is really helpful advice, especially the point about tracking everything even though we can't deduct it federally right now. I hadn't thought about the 2026 expiration date - that gives me hope that this situation might improve in a couple years. The education credits angle is interesting too. Some of those sales training courses I mentioned taking were pretty expensive, so if they could qualify for education credits instead of business deductions, that might actually work out better. Do you know if there are specific requirements for training to qualify as education credits for someone who's already working in sales? Also, I'm curious about your experience approaching your sales manager about expense reimbursement. What kind of expenses were they most willing to cover, and how did you frame the conversation? I'm worried about seeming like I'm complaining about costs or asking for special treatment.

Great question about the education credits! For sales training to qualify for education credits, it generally needs to either maintain or improve skills required in your current job, or meet requirements of your employer/law for keeping your job. The tricky part is that it can't be training that qualifies you for a new trade or business. Since you're already working in sales, courses that enhance your existing sales skills (like advanced negotiation, customer relationship management, or industry-specific product training) have a good chance of qualifying. Keep all documentation showing the course content relates directly to your current role. For the expense reimbursement conversation, I framed it as an investment in my performance rather than asking for help with costs. I prepared a simple proposal showing how certain expenses (client entertainment, training, professional subscriptions) directly contributed to my sales results. I used specific examples like "the sales methodology course I took helped me close X additional deals worth $Y in commissions to the dealership." Most sales managers understand that top performers need tools and training to stay competitive. The key is connecting your expenses to measurable business results and presenting it as a win-win rather than just asking for money back.

I did! I got a $300 bill reduced to $75 by calmly pointing out that we'd never discussed rates for phone consultations and that I'd have chosen email (which was covered in my package) had I known. I basically said "I value your expertise and am happy to pay for it, but I need transparency about costs upfront so I can make informed decisions." They were actually pretty reasonable once I framed it that way.

This is excellent advice about documentation and setting clear expectations going forward. I'm actually dealing with something similar right now and wondering - when you had that conversation about establishing billing guidelines, did you put the new agreement in writing? I'm worried about having another "he said/she said" situation down the road if we just discuss it verbally.

Absolutely get it in writing! I learned this the hard way from my first surprise billing incident. After our conversation, I followed up with an email summarizing what we discussed: "Just to confirm our conversation today, going forward you'll notify me if any question will require billable time beyond what's included in our annual service, and your rate for additional consultations is $X per hour with Y minimum billing increment." Then I asked them to reply confirming the terms. This way there's a clear paper trail and no room for misunderstandings later. It actually made our working relationship much better because we both knew exactly what to expect.

Yes, you can absolutely deduct home office expenses if you have a space used "regularly and exclusively" for business. Since you have a dedicated room, you likely qualify. You can use either the simplified method ($5 per square foot, up to 300 sq ft) or the regular method (calculating actual expenses). The simplified method is less paperwork but might result in a smaller deduction depending on your costs. The regular method requires tracking actual expenses (portion of rent, utilities, etc.) but could be more beneficial. TurboTax has a good section that walks you through both options so you can compare. As for audit risk, having a dedicated room that's used exclusively for business puts you in a much safer position than those claiming partial rooms or shared spaces. Just take photos of your workspace and keep them with your tax records as documentation.

This is really helpful, especially the part about distinguishing gross receipts from taxable income. I never thought about client reimbursements potentially being reported incorrectly. Quick question about the quarterly payments - is there a minimum threshold where you need to start making them? I'm worried about underpaying and getting hit with penalties, but I also don't want to overpay if my income varies a lot month to month. Should I just estimate conservatively based on last year's income?

Logan, I'm glad you found the responses here helpful! It's such a relief to know that others have gone through this exact same confusing process. I was starting to wonder if I had done something wrong when I got that vague letter, but it sounds like the IRS just has a really standard (and unfortunately uninformative) way of handling these Form 5329 submissions. The advisor transition issues seem to be pretty common too - it's frustrating how these kinds of changes can slip through the cracks and lead to missed RMDs. At least we're both being proactive about fixing the situation rather than just ignoring it and hoping it goes away! I'm at about 6-7 weeks myself, so we're probably on similar timelines. Fingers crossed we both get our resolution letters soon and can put this whole stressful situation behind us. Thanks for sharing your experience - it helps to know I'm not alone in this waiting game!