Unforeseeable Events, Covid forces the sale of primary residence

[aalfred]

Hello folks.

I have an appointment at my local IRS office regarding capital gains exclusion per Publication 523. The closest appointment is 30 days out. I am contacting this community to see if waiting for that appointment with the IRS is worth it!

The story is that hardship forced me to sell my primary residence in Aug 2022 after 16 months of ownership. The hardship was related to unforeseen Covid circumstances.
1. I lost my job in November 2021 due to corporate Covid policy,
2. I went into a forbearance program in June 2022 with the mortgage company,
3. maxed out 401K early contributions, and
4. drained my savings to meet basic living expenses.

Publication 523 lists some plausible exemptions on pages 6 and 7 (Unforeseeable Events) and (Other Facts and Circumstances). I meet the four bullet points listed on page 7:
• You sold your home not long after the situation arose. (8-months)
• You couldn’t have reasonably anticipated the situation when you bought the home.
• You began to experience significant financial difficulty maintaining the home.
• The home became significantly less suitable as a main home for you and your family for a specific reason.

I provided this information to my accountant, but they did not consider it my return. Thus, I have capital gains tax to pay IRS and my state (Georgia)! The accounting firm said to write a letter to the IRS and the state of Georgia with a plea! At this point, I’m assuming it might be outside their expertise, or they don’t want to deal with it. Frankly, I don’t see instructions in Publication 523 on how or what form to use for such an exemption. I hope the meeting with the IRS agent will provide some clarification/guidance.

Can this community share some thoughts on such hardship exemptions? Has anyone represented a client in this situation successfully? Your comments are greatly appreciated!

[rbynaker]

The regulations provide for some safe harbors:

https://www.law.cornell.edu/cfr/text/26/1.121-3

Does this one apply to you?: "The cessation of employment as a result of which the qualified individual is eligible for unemployment compensation"

Generally you would just file an amended return excluding the gain.  I don't know that "pleading" with the IRS will do much otherwise (although you may find a sympathetic ear to help you work through the 1040X).

[aalfred]

Thanks rbynaker!
Yes, areas of the Cornell link you provided further reinforce my position “(C) A change in employment or self-employment status.” An extension was filed, the return still needed to be submitted.

What I need at this phase is a new CPA! Someone that is more adapt in this area of expertise. 

Your comment was appreciated!

[abctax55]

".....What I need at this phase is a new CPA "

Took the words right outta' my mouth.  And not necessarily a new CPA, but at least a preparer that realizes s/he should be working for you, not for the IRS !

[BobKamman]

What you don't need is an appointment with IRS.  But maybe you need three appointments with IRS, which will result in three different answers, none of which are a defense when a fourth auditor sends you a notice of deficiency.  

Don't believe me?  Try your luck first with the IRS toll-free telephone site.  Those people have the same training, probably more, than anyone you meet at your local office.  

[aalfred]

Hello Bob.

I feared that my IRS appointment might be in vain hence I contacted this community. It now sounds like it will be counterproductive! Regarding the toll-free site, I didn’t get a chance; the system hung up on me twice after waiting on hold for an agent for over 30 minutes. I’m now searching for a new CPA/Prepare. Any recommendations? I’m in Atlanta, GA. 

[qbteachmt]

"hence I contacted this community"

Do you know what "this community" is, though? A user group of Pro Series tax prep software. It's not where to get personal tax help or to shop for local CPAs. Although everyone is sympathetic and tries to be helpful, of course, you are not asking about using software, or how to apply a tax regulation to what you are trying to enter into Pro Series.

Have you asked around your friends, business people, your State's licensing bureau? Finding good help means asking your trusted resources about who else can be trusted to help. Have you considered that Intuit provides for the exact type of thing you have, in their Turbo Tax community? That would be where peer users discuss non-software issues, non-client issues.

You seem to be lost on the internet.

You’ve come to a Peer User community for Intuit Income Tax Preparation products supporting tax preparation professionals using ProSeries, Proconnect and Lacerte Tax Preparation programs, and you may be looking for support as an individual taxpayer and/or using TurboTax. Please visit the TurboTax Help site for support.

And try this screen, for the various topics (subforums): https://ttlc.intuit.com/community/discussions/discussion/03/302

Your sign in user info here is the same one you can use over at the TurboTax forum.

Thanks.

[aalfred · Accepted solution]

Hello qdteachmt

Yes, I was lost on the internet when I found this awesome community and decided to reach out. No, I didn’t realize this was a specialized closed community…my apologies for the intrusion. During my quest, I did not see the Turbo Tax community you recommended, I will move the dialog to that form. Thanks for your guidance!

Since the 1980’s, I’ve always contracted a professional to manage my taxes, I never needed to research topics myself always relied on professional expertise. My business associates and a CPA I interviewed said I should prepare the return myself; my exceptions are justifiable, but most accountants don’t want to engage due to liability, plus it's not billable.

Thanks to this community for all the help! Moving on to Turbo now and attempting to prepare the return myself.

Kind regards.

[BobKamman]

"CPA" is too often a generic term bandied about by people who think anyone with a kitchen table and a laptop is a CPA.  Many CPA's do a lot of tax work and are good at it.  Others are good at something else, and hire people like me to do their own tax returns.  You should be looking for someone with a credential that requires training and continuing education -- that category includes enrolled agents (EA's).  There's a website for finding one in your area, I'll let some EA post it.  Generally the best starting point is to ask a friend or family member for a recommendation, then check out that person's credentials.