Hi people…
I’m reaching out for some advice regarding a notice I received from the IRS. We bought our house in 2017 and sold it in 2022 for $170k more than what we paid. Since it was our main residence, I believed that the gain wouldn’t be taxable and that I didn’t need to report it on my tax return.
However, I just got a CP2501 notice stating that I failed to report the sale as compensation. It looks like they received a 1099 from the closing law firm, and I have the same 1099. Now I need to respond to the notice and state whether I agree with this change. If I do, they will send me a notice of the additional tax I owe.
Am I correct in thinking I shouldn’t owe taxes on this sale? If so, how do I prove this to the IRS? The instructions in the notice are pretty vague, and when I called them, the agent couldn’t give me a definitive answer and suggested I consult a CPA.
Has anyone dealt with a similar situation? Any guidance on how to handle this would be greatly appreciated! Thanks