Based on everyone's experiences here, it's clear that Form 843 IS required along with your detailed letter for rev. proc 84-35 relief requests. I went through this exact process 6 months ago for my single-member LLC. Here's what worked for me: I completed Form 843 with "Request for penalty abatement under Revenue Procedure 84-35" in the reason section, then attached a comprehensive letter that specifically addressed each requirement in the revenue procedure. Make sure your letter includes: - Clear statement that you're requesting relief under rev. proc 84-35 - Detailed explanation of how you meet ALL the criteria - Timeline of missed filings and circumstances - Supporting documentation (bank statements, medical records, etc. if applicable) I mailed everything together via certified mail and got approval in about 10 weeks. The key is being thorough in documenting how you qualify - the IRS agents reviewing these requests need to see that you clearly meet every requirement outlined in the revenue procedure. Don't skip the Form 843 thinking the letter alone will suffice - you need both components for a complete submission.

Reading through everyone's experiences here has been incredibly helpful - I'm dealing with a similar situation where my LLC missed filing deadlines due to a family emergency that required me to travel out of state unexpectedly. One thing I haven't seen mentioned yet is the importance of checking which specific penalty you're requesting abatement for. Rev. proc 84-35 applies to failure-to-file penalties, but if you also have failure-to-pay penalties, those might require a separate approach or different documentation. Also, for anyone still unsure about the Form 843 requirement - I called the IRS practitioner hotline last week and confirmed that yes, Form 843 is absolutely required for formal abatement requests under rev. proc 84-35. The letter serves as crucial supporting documentation, but without the form, your request won't be processed through the proper channels. Make sure to keep copies of everything you send and use certified mail or fax with delivery confirmation. The IRS processes thousands of these requests, so having proof of submission is essential if you need to follow up later.

Just FYI, if you're planning to continue this business, you should look into whether you need to collect and remit sales/lodging taxes. Even if platforms like Airbnb handle this in some jurisdictions, others require you to register directly with the state/local tax authorities. I learned this the hard way and ended up owing back taxes plus penalties 😩

Great question about startup expenses! I've been working in tax preparation for several years and see this situation frequently with rental businesses. You're absolutely right to track these expenses - the IRS does allow deductions for legitimate business startup costs under Section 195, even before you generate income. The key is demonstrating genuine business intent and activity, which it sounds like you clearly have with your furnished room, professional photos, and active listings. A few important considerations for your specific situation: 1. **Documentation is crucial** - Keep all receipts, photos of your setup process, screenshots of your listings, and any correspondence about potential bookings. This proves your business intent. 2. **Subletting legality** - Make sure you have written permission from your landlord for subletting. The IRS won't allow deductions for activities that violate local laws or lease agreements. 3. **Business vs. personal use** - Only expenses directly related to the rental business are deductible. If you bought items that could be used personally (like a TV), you'll need to allocate the expense based on business use percentage. 4. **Schedule C reporting** - You'll likely file Schedule C for this business activity, showing your startup expenses as a loss for 2024. Since you're just starting out, I'd strongly recommend getting professional tax advice to ensure you're setting up your record-keeping correctly from the beginning. The small cost upfront can save you from much larger problems later!

I work in HR for a mid-sized company and we've been addressing this issue with our remote employees. Here's what many don't realize: employers can set up an "accountable plan" to reimburse employees for legitimate business expenses including home office costs. These reimbursements aren't taxable to employees and are deductible by the company. This can include partial internet, phone, supplies, and even a reasonable allocation of rent/mortgage for dedicated workspace. The key is proper documentation and business necessity. Instead of hoping for tax law changes in 2026, talk to your HR department about implementing an accountable plan. Many companies don't do this simply because they don't know it's an option. We implemented one last year and it's been a win-win - employees get tax-free reimbursements and we get the deduction plus happier remote workers.

Just an FYI - I've been a 1099 contractor for years and the home office deduction isn't the amazing tax saver many W2 employees think it is. You have to use the space EXCLUSIVELY for business - meaning no personal use whatsoever. The IRS is pretty strict about this. Plus, if you claim depreciation on your home through this deduction and then sell your house, you might face recapture taxes on the depreciation taken. It complicates home sales significantly. For most W2 employees, even if the deduction comes back, the 2% AGI floor that was mentioned above meant many couldn't actually benefit. And with the higher standard deduction now, even fewer would itemize enough to see any benefit. Don't make remote work decisions based on tax deductions that might return in 2026. There are much better reasons to work remotely than potential tax benefits that might not materialize or benefit you.

One thing nobody's mentioned - what about writing off a portion of your phone bill? Since you need it to run the Uber app, that's definitely a legitimate business expense. Same with any car chargers, phone mounts, etc. Also wondering if you're tracking miles driven with app on vs. off? That's super important for documentation if you get audited.

This is such a complex situation! I've been doing taxes for rideshare drivers for a few years now, and car camping while driving is definitely unusual but not unheard of. From what I've seen work best with the IRS, you'll want to document everything meticulously. The hours-based approach mentioned by CyberNinja is solid - if you're online 60 hours out of 168 total hours per week, that 36% business use calculation is reasonable and defensible. A few additional considerations: - Keep a daily log of when you go online/offline in the app - Track any personal errands or non-work driving separately - The storage unit is likely not deductible since it's for personal belongings, unless you can prove specific business items are stored there - Don't forget about other legitimate business deductions like phone percentage, cleaning supplies, air fresheners, bottled water for passengers, etc. The key is consistency in your method and thorough documentation. The IRS cares more about reasonable allocation and good record-keeping than the exact methodology you use. Make sure your tax preparer understands rideshare taxation - many general practitioners aren't familiar with the nuances. Consider getting a second opinion from a CPA who specializes in gig economy workers if your current tax guy seems unsure.

Don't forget to check if your state has different rules than federal for this kind of conversion! I got burned badly on this in California when I did something similar. The feds gave me a partial exclusion but CA had different rules that made more of the gain taxable at the state level.

Based on everyone's discussion here, it sounds like you need to carefully calculate whether moving back in for 2 years is actually worth it financially. With $270k in appreciation and roughly 5-6 years of rental use out of what would be 10+ years total ownership, you're looking at only a partial exclusion. Here's what I'd suggest considering: 1. Calculate your exact qualified vs non-qualified use periods 2. Factor in ALL the depreciation recapture you'll owe (this hits regardless of the exclusion) 3. Consider market timing - real estate cycles can easily wipe out tax savings 4. Don't forget state tax implications if you're in a high-tax state The math might show that selling now as a rental and paying the full capital gains could actually be better than waiting 2 years, especially if you factor in opportunity cost of the proceeds and potential market changes. A lot depends on your specific numbers and local market conditions. Have you run the actual calculations with your purchase price, claimed depreciation, and current market value? That's really the only way to know if the 2-year wait is worth it.