if you used TurboTax for the year of sale you should complete the home sale worksheet. this will transfer the information to form 8949. assuming you are entitled to exclude the entire gain, the form will report no taxable gain (column h) send the form back with the notice and a signed statement stating that the entire gain is not taxable per form 8949 included. based on the questions you answer in the home sale worksheet TT will determine if any portion is taxable. if any part of the gain is taxable you'll have to submit 1040-X with the form and a check for the tax due. the IRS will bill you for any penalty and interest due.
