One thing I'd add about your 23.5% calculation - make sure you're measuring the garage square footage accurately. The IRS expects you to use the actual usable business space, not including things like structural walls or areas you can't practically use for business purposes. Also, since you mentioned you've been using it exclusively for business since early 2023, you can actually claim this deduction for both your 2023 and 2024 tax returns. For 2023, you'll want to calculate it from when you started using it exclusively for business (not the full year unless you started January 1st). Regarding categorization - this goes on Form 8829 (Expenses for Business Use of Your Home) which then flows to Schedule C if you're a sole proprietor. It's not rental income/expense since you own and live on the property. The form will walk you through whether to use the simplified method ($5 per sq ft, max $1,500) or the actual expense method with your 23.5% calculation. Given the size of your space, the actual expense method will likely give you a much larger deduction than the simplified method, but remember what others mentioned about depreciation recapture if you sell your home later.

Great question about measuring usable space! Yes, you should exclude areas like where the water heater is located, as well as any built-in storage that you can't reasonably use for business purposes. The IRS wants the actual square footage that's available for your business activities. For the timing on your 2023 taxes, you do need to prorate based on the actual months of exclusive business use. So if you started using the garage exclusively for business in March 2023, you'd calculate 10/12 of your annual expenses for that year. Don't use the full year unless you truly started January 1st - the IRS is pretty strict about this timing requirement. I'd recommend measuring your garage carefully and creating a simple floor plan showing the business-use area versus any excluded spaces. This documentation could be helpful if you ever face questions about your calculation. Also keep records of exactly when you transitioned to exclusive business use in 2023 - bank records showing when you moved business inventory there, lease termination if you had previous business space, etc. The prorated calculation for partial 2023 plus your full 2024 deduction should still result in significant tax savings given the size of your space!

Just wanted to add something that helped me a lot when I filed my 1040X last year - make sure you keep detailed records of everything! I created a simple folder with copies of my original return, the amended return, all supporting documents, and notes about what I changed and why. This was super helpful when I had questions later and also gave me peace of mind. Also, don't stress too much about the process. Like others mentioned, filing an amendment doesn't automatically mean you'll get audited. The IRS processes thousands of these every day. As long as you're honest about the changes and include proper documentation, it's really just a paperwork exercise that takes time. The hardest part is honestly just waiting for it to be processed! One last tip - if you're expecting a refund from your amendment, don't count on that money for several months. Plan your finances accordingly since the processing times are quite long compared to regular returns.

Great question! I went through this exact process about 8 months ago and can share what actually happened. After I mailed in my 1040X (correcting some 1099 income I initially missed), it took about 3 weeks before I could see it in the IRS system using their "Where's My Amended Return" tool. The process itself was pretty anticlimactic - no scary letters or audit notices. After about 5 months, I got a simple letter stating they had processed my amendment and approved the changes. Since I owed additional tax, they sent a bill with the amount due plus interest (wish I had known about that interest tip someone mentioned earlier!). One thing that really helped my peace of mind was calling the IRS after about 12 weeks to check on the status. The agent was actually very helpful and explained that my return was in "normal processing" and there were no red flags or issues. She also confirmed that amended returns don't automatically get flagged for audit - they just require manual review to process the changes. The waiting is definitely the hardest part, but try not to overthink it. As long as you're being honest about the corrections and have the documentation to support your changes, it's really just a matter of patience while they work through their backlog.

Something else to consider is the recapture of depreciation if this was ever used as a rental property by any of the three owners. Even if the elderly mother lived there as her primary residence, if the adult children ever claimed depreciation on their ownership shares (maybe they treated it as rental income from mom), that depreciation has to be recaptured in the year of sale and can't be spread out using the installment method. This could create a significant tax hit in year one even with seller financing. The recapture is taxed at a maximum rate of 25%, which is often higher than their regular capital gains rate. Make sure they check with a tax professional about any depreciation that might have been claimed over the years. Also, since you mentioned they're family connections, be extra careful about the interest rate you agree on. The IRS requires seller financing to use at least the Applicable Federal Rate (AFR) for the loan term, or they'll impute interest income to the sellers anyway. For December 2024, the AFR for mid-term loans (3-9 years) is around 4.69%. Going below this rate could create phantom taxable income for them.

Based on all the discussion here, it sounds like seller financing could definitely work in your favor for negotiations! The installment sale method will help the three owners spread their capital gains tax over time, which is particularly valuable since they're retired and need to watch Medicare premium thresholds. Here's what I'd focus on in your negotiations: First, get clarity on whether any depreciation was ever claimed on the property - this will affect their year-one tax liability regardless of the installment method. Second, run the numbers on how much they could save in Medicare premiums by keeping their income below the IRMAA thresholds through installment reporting. You mentioned the mother lived there 30+ years, so she's likely got a huge potential capital gains exclusion ($250k) that makes this even more attractive for her. The adult children don't get that benefit, so the installment method is probably more valuable to them. I'd suggest presenting this as a win-win: they get tax benefits through installment reporting plus higher returns than CDs/savings accounts, while you get below-market interest rates. Just make sure your attorney structures everything properly with AFR-compliant rates and solid documentation. Given that these are family connections, the IRS will scrutinize the terms more carefully to ensure it's a legitimate business transaction.

As someone new to this community, I'm incredibly grateful to have found this thread. I've been dealing with a similar CP2000 notice for gambling "winnings" and was absolutely panicking until I read through everyone's experiences here. What really stands out to me is how this seems to be a systematic issue - casinos report individual wins above certain thresholds via W-2G forms, but the IRS doesn't automatically see the complete picture of your losses throughout the year. This creates these nightmare scenarios where you get hit with massive tax bills for "phantom income" that doesn't represent your actual net gambling position. The most reassuring thing I'm seeing from all these shared experiences is that this is absolutely solvable with proper documentation. The consistent pattern seems to be: respond promptly with your casino win/loss statement, don't panic and pay taxes you don't actually owe, and the IRS is generally reasonable once they see the full financial picture. For anyone else dealing with this situation - you're definitely not alone. This thread reads like a comprehensive guide from people who've actually been through the process successfully. The practical advice about organizing documentation, the specific resources mentioned (like taxr.ai for document organization), and the reassurance that you typically don't need expensive legal help unless the situation is extremely complex - it's all incredibly valuable. Thank you to this community for being so welcoming to newcomers and for sharing such detailed, actionable advice. It's exactly what someone in this stressful situation needs to hear!

As a newcomer to this community, I want to express my gratitude for finding this incredibly helpful thread. Reading through everyone's detailed experiences with gambling tax issues has been both educational and deeply reassuring during what initially felt like an impossible situation. What really strikes me is how this appears to be a systematic problem with the current reporting structure - casinos are required to issue W-2G forms for individual wins above certain thresholds, but there's no corresponding automatic reporting of losses to the IRS. This creates these terrifying "phantom income" scenarios where taxpayers receive massive bills for money they never actually netted after accounting for their gambling losses. The consistent theme I'm seeing across all the successful resolution stories is incredibly encouraging: respond promptly with thorough documentation (especially that crucial casino win/loss statement), don't panic-pay taxes you don't legitimately owe, and the IRS is generally quite reasonable once they can see the complete financial picture rather than just the partial reporting from W-2G forms. For the original poster and anyone else facing similar CP2000 notices - this thread serves as an excellent roadmap. The practical resources mentioned throughout (document organization services, IRS contact assistance, professional tax preparation help) provide great options for additional support without necessarily requiring expensive legal representation for what appears to be a common and very solvable documentation issue. Thank you to everyone who took the time to share their experiences and advice. This community's willingness to help newcomers navigate these stressful tax situations with such detailed, actionable guidance is truly invaluable!

Thanks so much for this clarification! I've been making the same mistake as the original poster, thinking weekends didn't count. It's actually really helpful to know that the automated systems are running 24/7 - that explains why I sometimes see status updates on Saturday mornings when I check the app. I'm also dealing with gig work income (mainly Instacart and some freelance graphic design), so it sounds like I should be expecting closer to 30+ days rather than getting anxious at the 21-day mark. The additional verification process for self-employment income makes total sense from a fraud prevention standpoint. Does anyone know if there's a way to tell if your return is in the additional verification queue, or do you just have to wait it out?

As someone who's been through this process multiple times with gig work, I can confirm what others have said - it's definitely calendar days for the 21-day timeline! I learned this the hard way after obsessively counting business days and getting frustrated when my refund seemed "late." One thing that really helped me was setting up an IRS account online to view my tax transcripts. While it doesn't give you a play-by-play of every step, you can at least see when different parts of your return get processed. For gig workers especially, I've noticed the transcript will show when they've matched your 1099s against what you reported - that's usually when the additional verification happens. The worst part is just the waiting and not knowing, but knowing it's calendar days and that the systems are working weekends definitely helps set realistic expectations. Good luck with your refund!