Thanks for mentioning this! I'll double check my EFTPS payments right away. Did you have to do anything special to get them to reallocate the payments to the correct years?

You'll need to call the IRS Business Tax line and specifically request a payment transfer. Have your EFTPS confirmation numbers ready along with the dates of the payments and the tax periods they should be applied to. I found it helpful to prepare a simple spreadsheet showing the payment date, amount, confirmation number, and which tax period each payment should apply to. The agent I spoke with appreciated having all the information organized, and it made the process much smoother.

What's the best way to word a reasonable cause request? My situation was similar but I'm not eligible for first time abatement.

Thanks for this perspective! One question though - does the storage area need to be COMPLETELY exclusive to inventory? Like, I keep most of my supplies in plastic bins that are stacked against one wall of the spare bedroom. The room is maybe 200 sq ft total, but the storage probably only takes up about 40 sq ft. Can I deduct just that portion?

The general rule is that the space needs to be used exclusively for business, but there's a special exception for inventory storage. If you're selling products as your business (which you are), and your home is the only fixed location of that business, you can deduct the space used for inventory storage even if it's part of a room. In your specific case, you could potentially deduct the 40 sq ft used for storage, not the entire 200 sq ft room. You'd calculate what percentage that 40 sq ft is of your entire home's square footage. So if your home is 2,000 sq ft total, you'd be deducting 2% (40 ÷ 2,000) of your eligible home expenses.

Can you do both in the same year though? Like use regular home office deduction for the storage space, but also use Augusta Rule to rent your living room to your business for a few days for meetings?

Would it be better to file as a Schedule C business loss or just take the casualty loss directly? Does it make a difference tax-wise? I'm in a sorta similar situation with my small side business.

You'll definitely want to file Schedule C to report all your business income and expenses, including the equipment that was destroyed. The casualty loss is reported on Form 4684, but since these were business assets, the loss ultimately flows to your Schedule C. Filing the business loss on Schedule C is generally more advantageous than taking a personal casualty loss because personal casualty losses are highly restricted under current tax law (only federally declared disasters qualify). Business casualty losses don't have these same limitations and can offset your other income.

The key difference between a hobby and a business isn't whether you made money yet, but whether you had a reasonable expectation of making a profit and were operating it in a businesslike manner. Plenty of legitimate businesses have losses in their first year or even several years.

How long did it take to get your refund after mailing in the paper returns? And did you mail them all together or separately?

It took about 12 weeks to get my refund after mailing in the paper returns. That's much longer than the typical 21 days for e-filing, but expected for paper returns. The IRS is still working through backlogs. I mailed each tax year in separate envelopes to different processing centers. The IRS has different mailing addresses depending on your state and the tax year, so definitely check the IRS website for the correct address for each return. Don't bundle them together - each year needs to go to the specific processing center for that tax year.

What software did you use for your back filing? I'm trying to figure out the most affordable option since I have to do multiple years.

Thank you for the specific steps! This makes a lot of sense. I checked my tax software again and I think I discovered the issue - there's a specific question about "Do you qualify to deduct your IRA contributions?" that I must have answered incorrectly. Previous years I knew to say "No" but this year with the job change and severance, I might have clicked "Yes" by mistake. I'll try redoing those steps in the correct order. Would it also make sense to just delete all my IRA entries and start fresh with these steps in mind?

Yes, I'd recommend deleting all the IRA-related entries and starting fresh. That's the cleanest approach. Some tax software doesn't handle corrections well when it comes to the 8606 form. When you restart, just follow those steps in order. The key is definitely that "Do you qualify to deduct" question - that's the exact one that determines how the software handles everything downstream. Always answer "No" for a backdoor Roth strategy since the whole point is you're over the income limits for deductible contributions. And don't worry about the severance - it's just regular income. It doesn't change how backdoor Roth contributions work. The W-2 Box 13 check is typically for retirement plan participation at that employer, which is separate from your individual IRA strategy.

I haven't heard about increased scrutiny, but I can tell you that reporting Backdoor Roth incorrectly is definitely a red flag. When your 1099-R shows a distribution (the conversion) but there's no corresponding basis tracking on Form 8606, it creates a mismatch that their systems can easily detect.