You were required to report the sale. If you had a gain (selling for more than the purchase price), that is taxable income. If you did not report the sale, the IRS is allowed to assume the entire amount is taxable, because you did not show the report of what your purchase price and other expenses were.
It sounds like you never reported the gain on your return. Your remedy would be to prepare an amended tax return that reports the sale, including the purchase price, selling price, any expenses, and calculates the tax if you had a gain. Send the amended return and a letter of explanation to the address on the notice. Make sure you have proof in case you are asked (like your HUD-1 closing statements from the purchase and the sale, documenting the purchase price and selling price.)
You can probably do this yourself, but you certainly could get professional help.
See this for more on selling your home.
https://www.irs.gov/forms-pubs/about-publication-523
