Doesn't this all depend on how the original tax return was filed? Did you actually report the home sale on the 2023 return in the first place? If not, that might be why the IRS is questioning it. When I sold my primary residence, I reported it on Form 8949 with code "H" to show it was my primary residence and excluded under Section 121, then carried that to Schedule D. If you just didn't report the sale at all (thinking you didn't need to because of the exclusion), that might be your problem.

That's exactly the issue! When you qualify for the Section 121 primary residence exclusion, you still need to report the sale on your tax return - you just apply the exclusion to reduce or eliminate the taxable gain. The IRS computer systems match up the 1099-S they receive from the closing company with what's reported on your return. When they don't see the sale reported at all, they assume you forgot to include it and send those scary letters. The fix is straightforward but requires filing Form 1040X (amended return). You'll report the sale on Form 8949 and Schedule D, calculate your gain (sale price minus your adjusted basis including improvements), then apply the $250,000 exclusion. Since your gain was around $355,000 ($510k - $155k), you'll still have about $105,000 of taxable gain after the exclusion, but that's much better than being taxed on the full $355,000! Don't panic - this is a very common mistake and the IRS sees it all the time. Just make sure to include good documentation of your mom's ownership and residence history when you file the amendment.

Anyone know if there's a way to opt out of the IP PIN program once you've opted in? I initially signed up after some concerns about identity theft, but now it feels like an extra hassle every year.

Just to add some clarity on the timing - I've been in the IP PIN program for 3 years now and the pattern is pretty consistent. New IP PINs are typically available online through your IRS account starting around December 28th-January 2nd. The physical CP01A notices usually arrive in the mail between January 10th-20th, depending on your location. I'd definitely recommend setting up your IRS online account if you haven't already - it's much more reliable than waiting for mail, especially if you're planning to file early. You can access it through the "Get an IP PIN" tool on IRS.gov once the new year hits. Just make sure you have all your previous year tax info handy for identity verification when you log in. Pro tip: Set a calendar reminder for early January to check your online account. That way you can get your PIN and file as soon as W-2s and other documents are ready!

One more exception worth exploring that hasn't been mentioned yet - if you become unemployed and use the withdrawal to pay for health insurance premiums while you're receiving unemployment compensation, that portion is exempt from the 10% penalty. Since you mentioned taking a sabbatical with no employment income, you might qualify for unemployment benefits depending on your state's rules and the circumstances of leaving your job. If you do, any portion of your 401k withdrawal used for health insurance premiums during that period would avoid the penalty. This could be particularly valuable if you're planning to get COBRA coverage or buy individual health insurance during your sabbatical year. Even if it only covers part of your $14,000 withdrawal, every bit helps reduce that penalty. The key requirements are: (1) you must be receiving unemployment compensation, (2) the withdrawal must be made during the year you received unemployment or the following year, and (3) you must actually use the money for health insurance premiums. You'll need to keep good records showing the connection between the withdrawal amount and your insurance costs. Worth checking if this applies to your situation before you make the withdrawal!

Great question about the 10% penalty vs. standard deduction! I went through this exact scenario two years ago during my career transition. You're correct that the $14,000 withdrawal would be covered by your $15,400 standard deduction, so $0 federal income tax. However, the 10% early withdrawal penalty ($1,400) is calculated separately on Form 5329 and added to your tax bill regardless of your income level or deductions. So yes, you'd still owe that $1,400 penalty even though your income is below the standard deduction threshold. The penalty isn't considered "income" - it's an additional tax that applies specifically to early retirement withdrawals. That said, after reading through all the excellent advice in this thread, I'd strongly recommend exploring the penalty exceptions before making your withdrawal. The medical expense exception mentioned earlier could be huge if you had any significant healthcare costs this year. Also, if you're planning any education during your sabbatical, those expenses might qualify for an exception too. Given the complexity and potential savings, a consultation with a tax professional familiar with early withdrawal strategies would probably pay for itself. There are clearly multiple angles to explore that could reduce or eliminate that $1,400 penalty entirely.

I see you're dealing with the classic 570/971 combination - I just went through this exact same situation a few months ago! The 570 code is essentially the IRS putting a temporary freeze on your refund while they conduct some type of review, and the 971 code means they've issued (or will issue) a notice explaining what they need from you. Based on your transcript, your math looks right - you should be getting a refund of $6,279 ($7,037 withholdings minus $1,658 tax liability). The review could be for identity verification, income verification, or just a random audit selection. Here's what I learned from my experience: watch your mail like a hawk for that CP letter (it should arrive within 2-3 weeks of the 971 date), respond immediately to whatever they're asking for, and keep checking your transcript weekly for updates. Once I submitted my requested documents, it took about 5 weeks for the 570 to reverse and my refund to process. It's stressful but most people do get their full refund - just with delays. Hang in there!

The 570 and 971 codes can definitely be nerve-wracking when you first see them! I had these exact same codes last year and went through the whole process. The 570 code means your refund is temporarily on hold while the IRS reviews something in your return - it's not necessarily bad news, just means they need to verify something before releasing your money. The 971 code with the October date means they issued (or will issue) a notice explaining what they need. Since it's dated 10-22-2024, you should be getting a letter soon if you haven't already. This could be anything from identity verification (very common) to them needing additional documentation about your income or deductions. Your refund calculation looks correct based on what you've shared - $7,037 in withholdings minus your tax liability should give you a substantial refund. The key is responding quickly to whatever letter they send you. In my case, it was just identity verification through their online portal, and once I completed that, my refund processed within about 6 weeks. Keep checking your transcript weekly for updates and watch your mail closely. Most people with 570/971 codes do get their refunds - it's just a matter of patience and responding promptly to their requests. You've got this!

I was in exactly your situation last month! Here's what worked for me step-by-step: 1. First, I checked my return status using the IL Where's My Refund tool 2. When it showed "processing" for 3 weeks, I called the IL DoR 3. The agent confirmed my return was approved but waiting in the deposit queue 4. My refund appeared exactly 2 days later The timing seems to be much better now than earlier in the season. My colleague just got his IL refund in 12 days from submission to deposit! I think they've worked through their backlog finally.

Thanks for starting this thread! I'm in a similar boat - filed my IL return on March 8th and still waiting. The divorce filing status change definitely seems to add extra processing time. I've been using the IL Where's My Refund tool religiously, but it's been stuck on "Your return is being processed" for over 3 weeks now. Based on what everyone's sharing here, it sounds like we're right in that normal window, which is reassuring. The batched deposit schedule on Tuesdays/Fridays is really helpful to know - I'll stop checking my account every single day! 😅 Has anyone noticed if the IL DoR sends any email notifications when your refund is actually approved and scheduled for deposit? Or do you just wake up to find it in your account?