I got a CP2000 notice that I didn't claim a real estate sale. I sold my personal home that I had lived in for the previous 3 years with <$100k gained. How do I reply?

[tagteam]

Follow the instructions in the TurboTax Help article (link below).

https://ttlc.intuit.com/community/irs/help/i-got-a-cp2000-notice-from-the-irs/00/27061

[Hal_Al]

Most likely, the IRS received a copy of the form 1099-S that was issue for the sale.  Instead of getting this form in January, after the close of the tax year,  as you do other tax forms, it was included in your closing papers.  Therefore the sale should have been reported on form 8949 and include with your tax filing.  Form 8949 would have indicated the home sale exclusion, so that 0 capital gain was reported.

I suggest writing to the IRS  to explain the situation; that this was the sale of your home, that you owned and lived in for more than 2 years of the 5 years prior to sale and that the gain was less than $100K.

[Anonymous]

here' what probably happened.  a 1099-S was filed with the IRS.  the IRS has no way of knowing your basis or whether you meet the other requirements for full tax exemption so you got the notice.     even if your gain was completely exempt with a 1099-S being issued, you needed to report the sale on form 8949

[PToms]

The problem is I did as the CP2000 notice instructed, letting them know I qualified for the real estate gain exemption and provided supporting documents (no amended return was necessary according to the IRS) then received another letter from the IRS saying they did not receive the letter! I have 30 days or I owed against the entire amount which is astronomical and a huge mistake on their part.  These are computer generated letters from the IRS so I consulted a tax attorney which will probably cost me $7,200 and lots of anxiety over the next 6 months to get this litigated properly.  If you sell a home and it was the first home I sold because I lived in it for 18 years, bring your taxes to a tax attorney lesson learned.

[Mike9241]

 a 1099-S was likely issued and you failed to report the sale and exclusion on your tax return - Form 8949/ Schedule D. .  if you had you would have not gotten the first notice nor a CP2000 letter which is likely in error because the IRS is so far behind in processing letters (your initial response) and tax forms mailed in.  you probably didn't use a tracking service so you would know for certain that the IRS received your response to the first notice. Using a tracking service for any response to an IRS notice is advisable for this reason.  the point is thousands of taxpayers sell their principal residence every year and use do-it-yourself software without the need or cost of a professional. Savings - what a pro would charge for doing a return (tax attornies are expensive) and in your case the $7,200(?) the tax attorney is charging to respond to the CP2000

Turbotax should have asked you about the home sale and you either ignored it or answered incorrectly. 

if you hadn't engaged an attorney I would have suggested using either:

The Audit Defense service is provided by TaxResources, Inc., also called TaxAudit.com, in partnership with TurboTax. If you paid for Audit Defense and you received an IRS notice, call TaxResources, Inc. at 877-829-9695, or report your IRS notice on their website at http://intuit.taxaudit.com/. 

or send in the following letter with the CP2000 a 1040X, Form 8949 reporting the home sale and exclusion and the related Schedule D

<Date>

<Address of the IRS service center from 

which you received the notice>

<Your Name>

<Address>

Phone: XXX-XXX-XXXX

Tax Period: XXXX

Taxpayer ID: XXX-XX-XXXX

Tax Form: 1040

Re: Response to CP2000 Notice Dated Month, XX, Year

To Whom It May Concern,

I received your notice dated Month, XX, Year, a copy of which is enclosed as well as completed forms you asked me to provide and return to you by Month, XX, Year. 

After carefully reviewing your notice, I have checked page X of the notice indicating that I do not agree with the changes the Internal Revenue Service (IRS) is proposing.

The notice indicates that I underreported $XX,XXX of income reported to you via Form 1099-S issued by (insert company name).

The amount reported on Form 1099-S merely shows gross sales price. It does not include my cost basis for the home sold in question. See enclosed Form 8949 for my cost basis and applicable home sale exclusion.

As you can see, the actual amount of taxable profit on the sale is $0.00 as per Form 8949. 

Therefore, I respectfully disagree with the proposed amount and request you to adjust my tax account accordingly.

Please do not hesitate to contact me at either the address or phone number included above.

_______________________

<Taxpayer Name>

Enclosures:

CP2000 Notice dated <Date>

Response Form (***make sure to check the right box***)

IRS Form 1040X

IRS Form 8949 

IRS Schedule D 

[PToms]

Excellent response thank you, turbo tax did ask but did not refer me to the 8949 schedule-d and the IRS return is a PO box, in retrospect the fax # is the best way to respond with my letter of explantion, still I do not trust their response times. I did not ignore the questions I met all the gains exemptions and just did a faux amendement to make sure I went through everything correctly.  The 7200 is a quote that it might take to litigate the mess not to file an amendment, which is better than the astronomical amount compared to what the IRS says I owe. I'm seeing a different attorney today for another quote furthermore the IRS isn't taking calls there is nobody to talk to it is all automated.  Another thing is the IRS didn't send me anything in 2020 I received it in Sept 2021 yet all the charges for penalties and interst are associated with the entire time frame from the time of filing to now.  Brutal. It's okay I'm mitigating the circumsttances to correct being hung out to dry by the title company and turbotax and I do bare the responsibility for not seeking a professional tax service to deal with the first sale of a home that was worth a lot of money. I've used turbo tax for 15 years with no issues unti this one very important glitch

[Critter-3]

The closing company would have mentioned the 1099-S form in the blur of paperwork they passed by you  at the closing so they are not to blame for your not remembering it or knowing what to do with it .  All you need to do now is to respond to the IRS notice with the hard facts as already mentioned in this thread and this issue will be put to rest ... you will likely get another letter while the situation is being processed.   Don't think it will work but you can try calling the number on the notice to settle this.