Heat 1 tablespoon olive oil in a large pan over high heat. Add finely chopped mushrooms and cook without stirring 2–3 minutes, then stir and cook 3–4 more minutes until all liquid has evaporated and mushrooms look dry and browned. Add garlic, cook 1 minute. Season with salt. Spread on a plate and cool completely.
Combine cooled mushrooms with breadcrumbs, parmesan, beaten eggs, parsley, Italian seasoning, smoked paprika, onion powder, salt, and pepper. Mix until combined. If too wet, add breadcrumbs 1 tablespoon at a time. Refrigerate 15–20 minutes. Roll into balls using lightly oiled hands — about 1 tablespoon of mixture per ball.
Heat remaining olive oil in a large skillet over medium-high heat. Add meatballs with space between each. Cook without moving 2 minutes until browned on the bottom. Turn gently and brown on remaining sides — 6–8 minutes total. Work in batches. Set aside.
In the same pan, heat olive oil over medium heat. Add garlic and cook 90 seconds. Add crushed tomatoes, basil, oregano, sugar if using, salt, and pepper. Stir and bring to a simmer.
Nestle browned meatballs into the sauce. Spoon sauce over each one. Reduce heat to low, partially cover, and simmer 15 minutes.
Serve over cooked pasta with extra parmesan, fresh herbs, and crusty bread alongside.
