Amending your 2020 return to include the sale of the home is the preferred option at this point. Based on what you have stated, you may be able to exclude all or part of the capital gains from the sale of the home and thus, may not owe tax and/or penalties in the amounts indicated by the IRS.
Even though you may not owe any tax from the sale of your home, it is still preferable to include the sale on Form 8949, and Schedule D because including the sale on your return starts the clock running on the statute of limitations. What this means is that you are able to defer capital gains on the sale of a primary residence only once every two years. This two year period is sometimes referred to as the "look back" test. Now, a persuasive piece evidence you can use to prove you pass the look back test for any home sale in the future is your accurately filed tax return. Therefore, you should amend your tax 2020 tax return to include the sale of your home.
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