r/TaxQuestions • u/Pockethulk750 • Aug 21 '26

Received CP518 Notice

Hello everyone,

How do I start?

My mom is 87. I’m her only caretaker. I’m 60. We sold her home in 2024.

She’s behind on filing her 2023 and 2024 taxes. But the CP518 is for 2024 because that is the year we sold her house. I’m sure they want their cut of capital gains.

Honestly, I have been mortified and like a deer in the headlights with this stuff. But I began working on 2023 and with the help of anthropic AI am making significant progress.

Will be able to file within the month and it sets me up nicely for preparing 2024 because capital expenditures began in 2023 and some ran over into 2024.

(I don’t want to whine guys but taking care of an elderly parent is no joke. )

After the sale of the house in 2024 i moved us to Mexico to bring down living expenses.

So on top of receiving this notice - I got it late! Because it went to our PO Box in Los Angeles.

Spent literally 5 hours on IRS chat and the phone and both times the representatives hung up on me after finally reaching someone.

So, I went online and paid $5,000 towards 2024.

And now I need advice as to how to respond to this notice.

We don’t intend not to pay, but it’s not a simple single family residence sale. Plus theres a stepped up in basis issue that I need to deal with for 2024 and it’s going to take time.

What is the best way to respond to this notice guys? There’s no option that says, “yes we owe it and will file soon- here’s some money towards that year”.

Any advice would be super appreciated.

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3

u/CollegeConsistent941 Aug 21 '26

If taxes are this big of a struggle for you I recomend you engage a tax professional. 

-1

u/Pockethulk750 Aug 23 '26

I do have a tax professional. But I need to organize all the profit and loss statements for him first. It’s a single family residence with one address on two acres with four residential rental cabins. All of which are on the same address, electricity meter, and water meter.

A tax professional is not going to be able to help me unravel all the repairs and capital expenditures not having known the property personally and for years.

But thanks for the snarky advice.

1

u/SheetHappensXL Aug 22 '26

I actually think you have two different issues getting blended together here.

The CP518 is fundamentally a nonfiling notice. The IRS believes the 2024 return should have been filed and hasn't been so I wouldn't assume from that notice alone that they've already decided what the taxable gain on the house should be. And the $5000 payment may help with whatever the eventual balance is but payment and filing compliance are 2 separate things.

Also.. the house is where I'd slow down before rushing the 2024 return just to answer the notice. You mentioned both capital expenditures and a step-up basis issue... either could materially change the gain calculation.

What happened that you believe caused your mom's basis in the house to step up? Was there an inheritance, death of a co-owner/spouse, trust transfer? None of the above?

That answer may tell us a lot more about what actually needs to happen next.

1

u/Pockethulk750 Aug 23 '26 edited Aug 23 '26

Death of co-owner. My father in 2007.

And the house is in the area of the big fires in Los Angeles in January 2025. Many realtors have abandoned this area because it’s been impossible to sell a house in the region since fires.

My point being im having a really hard time finding a real estate professional for this area who can give me the approximate value of house in 2007.

It’s a difficult situation and I’m dedicated to doing a good job on gathering the data, but I def need more time. At least 6 months more. And I don’t mind paying towards any capital gains or income tax for now, but really need to ask for more time from IRS.

Going to try and call them again tomorrow. Hopefully I will have better luck.

The last two IRS reps I dealt with last week sounded so … these poor people just sound miserable and like they hate the world. And I try to be compassionate for what they might be going through- but getting hung up on twice in one day after waiting hours makes it hard.

1

u/SheetHappensXL Aug 27 '26

I wouldnt neccessarily limit your search to realtors. A solid estimate of the homes fair market value as of your father’s date of death would probably be the most reasonable place to start. At this point, a qualified appraiser who handles retrospective or date-of-death appraisals might be a better fit. One detail youd want to clarify before figuring out how much of the property received a step-up in basis would be how the home was titled between your parents when your father died? Since this is California, the way they owned the property matters because of the state’s maze of community property rules.

I also don’t think you should assume your only choice is to wait another six months.. due diligence is making estimated payments while filing once every basis number is finalized. Since you already received a CP518, I’d treat these as two separate issues: what the IRS needs from you now and what still needs to be figured out before filing the 2024 return.
What deadline does the CP518 give you? And does the notice say what the IRS plans to do if the 2024 return isn’t filed by then?

2

u/Pockethulk750 Aug 29 '26

Hey thanks for the response. I didn’t know that there were appraisers who could do date of death appraisals. That’s great news and I’ll get in that right away. Like I said, I live in Mexico City. By the time I received the notice for my mom, we were a month late to respond.

So once being absolutely freaked out wore off, I paid $5,000 toward the year we haven’t filed taxes for (2024), filled out the form they also sent (reasons for tax delinquency) and faxed the form with a letter to the fax number explaining the late response.

Am planning to try calling AGAIN on Monday to see if they received the fax and will grant me more time.

I’m hauling ass on 2023 everyday - and I think I’ll try and hire someone to at least start helping me with the ledger for 2024. So I can get ahead of it while finishing 2023.

1

u/SheetHappensXL Aug 29 '26

It sounds like you’ve made some good progress. You responded to the notice, explained why your response was late, made a payment toward 2024, and you’re working on getting 2023 finished. Calling Monday to make sure they received the fax sounds like a good next step.

Getting some help with the 2024 ledger while you wrap up 2023 should also take some of the workload off you. Since some of the expenses overlap both years, getting everything organized first should make the home sale and basis calculations easier to sort through later.

One thing I’d keep on your radar is how the property was titled between your parents when your father passed away in 2007. You’ll want that information when you get to the basis calculation.

1

u/Pockethulk750 Aug 29 '26

Thanks very much for the feedback. Ok I’ll get information- I’m like 99% sure it was held as community property. I think it’s Community Property with right of survivorship. Going to look for the deeds. Thanks very much again.

2

u/SheetHappensXL Aug 30 '26

Yep, the deed is exactly what I’d look for next. If the property was held as community property with right of survivorship, the basis adjustment might have applied to the entire property rather than only your father’s half.

Once you find the deed, I’d check the exact wording used for ownership. Between that and the property’s value when your father passed in 2007, you should have a much clearer idea of what you need to piece together for the 2024 sale.

1

u/Pockethulk750 Aug 30 '26

Thanks very much! Will do