I sold my house in 2018. I did not declare the sale on my income tax return and I got a letter stating I owe the IRS $350,000. Is it an easy fix and what are the steps?

[user710543430]

It was my primary residence and should have not be income.

[DoninGA]

Apparently the IRS received a Form 1099-S for the sale of the residence.  You should also have received a Form 1099-S for the sale.

When the IRS receives a Form 1099-S they expect to see the sale reported on a tax return, gain or loss.

You will need to amend the 2018 tax return to report the sale.  After the amending the tax return there will be a Schedule D and a Form 8949 created for the sale.  There would not be any taxes owed on the sale if you were eligible to exclude the gain or there was a loss on the sale.

For the exclusion you must have sold your primary personal residence and you lived in and owned the home for at least two years in the five year period on the date of sale.  The home sale exclusion is  $250,000 if filing Single or $500,000 if filing Married Filing Jointly (and both lived in the home for two years).

If you had a gain greater then the exclusion amounts then you would have to report the sale.  Also, if you received a Form 1099-S for the sale either with a gain or a loss, the sale has to be reported.

To amend the 2018 tax return if you used the TurboTax online editions -

1. Sign in to TurboTax.
2. Scroll down to Your tax return & documents (you may need to select Show), select 2018 and then Amend (change) return.
3. Carefully follow the instructions. Don't worry if your refund changes to $0. This is normal on amended returns.
4. When finished, we'll give you instructions for printing and mailing your amended return as amendments can't be e-filed.

• Click on Federal Taxes (Personal using Home and Business)
• Click on Wages and Income (Personal Income using Home and Business)
• Click on I'll choose what I work on (if shown)
• Scroll down to Less Common Income
• On Sale of Home (gain or loss), click the start or update button

Or enter sale of home in the Search box located in the upper right of the program screen. Click on Jump to sale of home

Make sure that you indicate that you want the sale of the home reported on your tax return.

[rjs]

The amount of tax that you say the IRS is asking for strongly implies that you are at a financial level where you should be working with a tax professional who specializes in high-net-worth individuals, not doing it yourself.

If you choose to try to handle this yourself, follow the instructions in the IRS letter for how to respond if you disagree with the amount owed. Read the entire letter carefully. Be sure to respond by the deadline in the letter. Send your response by a service that provides tracking and confirmation of delivery, such as certified mail with a return receipt. Keep a copy of everything you send.

If you prepare an amended return (which seems likely), follow the instructions in the IRS letter for where to send it, which is probably different from where you would send it if you were filing it on your own initiative.

[SteamTrain]

This might be one of those...What did you really mean ? situations.

a) .....the IRS thinks you owe them another $350,000 in actual taxes (which is what you said), and may imply selling a home for ~$1million or more .

or instead

a)  Does the IRS think you owe a tax on $350,000 more income?  (i.e. sold home for ~$350,000)