Did not include sale of primary home

[munnik]

I have completed several amended returns for 1099-B capital loss that my fiance neglected to include in his original tax returns (2017-2019).  During this time I setup access to his IRS on-line account.  Recently a friend of ours received a tax bill from the IRS for capital gains on the sale of their primary home. They did not receive a 1099-S and did not report the sale of their home because their gain was less than the allowed exclusion.  This reminded my fiance that he also sold his house in 2017 and also did not receive a 1099-S.  His capital gains from the home sale were far less than the allowed exclusion so he did not include the sale of the home on his return.   I logged into his account and looked at his Wage and Income Transcript and found that a 1099-S had been reported to the IRS.

The amended 2017 return was submitted in Feb of 2021 and we are still waiting to get confirmation that they are processing the return.  The amended return also did not include the sale of the home.  It is too late to file another amended return. I would like to be proactive and head this off.  He has received no notifications concerning the sale of his home but I am sure they will be looking closely at his income when they eventually get around to processing his amended return. 

[Critter-3]

First the friend ... the IRS must have gotten a 1099-S reporting the sale so that is why they got a letter.   Those forms are included in the closing docs you get and are not mailed in January like other reporting forms.  

As for you ...  the amended return you mailed in earlier this year will required at least 6 months to process probably longer ... do NOT send in anything else at this time.   When you eventually get the IRS notice you can simply respond with the facts of the sale showing the profit was excludable ... may not need another amended return for just this so call the number on the notice to see how they want it handled.  

[munnik]

Thanks for the quick response.  Just to confirm our friends actually got a $300K bill  (capital gains for the entire gross proceeds).  They are working with an accountant to file an amended return (sold home in 2018). 

I also filed amended returns with the Maryland.    They were quickly processed and received refunds for lesser amounts (2018, 2019). For the  2017 Maryland amended return,  got a notification asking for a federal statement of change (proof of IRS acceptance of the 2017 amended return) with a deadline of the end of this month.  Obviously, it is highly unlikely that the IRS will have the federal amended return processed in time.  At least I have a contact and phone number for the state.  Hopefully they will add some time to their deadline.

I'd be happy to receive a notification before a bill so we have the opportunity to address the exclusion.  I have called several months ago and spoke to a live IRS person concerning the amended returns.  They were very nice but could not even confirm receipt of the amended returns.    One of the returns included a payment (check) which was cashed within a week.  Would it do any good to call again? 

Thanks again!

[Critter-3]

Just sit tight ... you know they have the return since they cashed the check so all you can do now is wait.