I've been following this thread and wanted to add something that might be helpful for your specific timing situation. Since your loans don't start accruing interest until 2027, you're in a unique position to potentially benefit from the current inverted yield curve. Right now, shorter-term Treasury rates are actually higher than longer-term rates in many cases. This means you could potentially get better returns with 6-month or 1-year Treasury bills than with longer-term bonds, while keeping your money more liquid for when you need it. Also, since you mentioned you just graduated, make sure you're not missing out on any other education-related tax benefits for 2025. The American Opportunity Credit can sometimes be claimed for expenses paid in the first few months after graduation if they were for the previous tax year's education. It might be worth double-checking your 1098-T and any spring semester expenses. The strategy others mentioned about laddering T-bills while mixing in some I bonds for inflation protection really does sound optimal for your timeline. You get safety, decent returns, and flexibility - which is exactly what you need while you're transitioning from student to loan repayment mode.

Great discussion here! I wanted to add one more perspective since you're in such a good position with time before your loans start accruing interest. Given that you're looking at a 2-3 year timeline and want to keep things relatively safe, you might also want to consider the tax implications of your investment gains. Since you can't use the education expense exemption for loan repayment, any gains from CDs, T-bills, or regular bonds will be taxed as ordinary income. However, if you're in a relatively low tax bracket now (which many recent grads are), this might actually be a good time to realize those gains. Your tax rate on the investment income might be lower now than it will be in a few years when your career income ramps up. One hybrid approach: put the core amount you know you'll need for loans into the safe T-bill ladder strategy others mentioned, but consider putting a smaller portion into something like a tax-managed index fund or municipal bonds if you're in a state with income tax. This gives you some upside potential while keeping most of your money safe. The key is you have time to be strategic, which is a luxury many people don't have with student loans. Make sure whatever you choose, you're comfortable with the risk level and timeline!

Hi Cynteria! Tax code 291 typically refers to "Additional Medicare Tax" on your tax documents. This code by itself doesn't indicate that you're receiving money - it's usually related to additional Medicare tax that may have been withheld from your wages if you earned over certain thresholds ($200,000 for single filers, $250,000 for married filing jointly). To better help you understand what this means for your specific situation, could you provide a bit more context? Are you seeing this code on your W-2, tax return, or another document? This will help clarify whether it affects your refund or tax liability.

Have you asked your HR department? They might have specific guidance on this situation since they're the ones who set up the temporary assignment. Sometimes companies have tax professionals who can give you the correct answers for your specific situation.

Great advice from everyone here! Just wanted to add that even though your expenses aren't deductible, you should definitely keep all your receipts and documentation from this temporary assignment. If the IRS ever questions anything about your income or work situation from that period, having those records will help establish that this was a legitimate work assignment (even if voluntary) and not just a vacation. Plus, tax laws can change - while these expenses aren't deductible now under current rules, it's always good to have the documentation just in case. Also, since you mentioned this was partly to explore a potential future move to Washington, if you do end up relocating there permanently for work in the future, some of those costs might become relevant for calculating moving expense deductions (though those are also very limited now). Better to have the records and not need them than the other way around!

I literally wasted 30+ hours trying to decipher my transcript after a similar issue. Finally used taxr.ai and it explained everything in seconds. Told me exactly what was happening with my refund and saved me so much time and stress. It's insanely good! I use it every week to track my amended return progress. https://taxr.ai

I went through this exact same situation two years ago! Entered my old bank account number by mistake and panicked when I realized. Here's what actually happens: The bank will reject the deposit (usually within 1-3 business days of the scheduled date), and then the IRS automatically switches to mailing you a paper check. The whole process typically takes 4-6 weeks from the original deposit date. The frustrating part is that "Where's My Refund" might not update immediately to show the status change, so don't panic if it still shows the direct deposit info for a while. Just keep checking every few days and eventually it should update to show that a check is being mailed. Unfortunately there's absolutely nothing you can do to speed this up - no amendments needed, no forms to file. The system handles it automatically. I know it sucks when you're counting on that money, but at least you'll definitely get it! Hang in there.

Has anyone here actually tried the "pay the penalty later" approach? I'm wondering what the actual experience is like when filing. Is it complicated to calculate the correct penalty amount? Does it trigger any audit flags?

This is a great question that many people face after large conversions! One additional consideration beyond what others have mentioned: if you're in the 35% tax bracket, you might want to check if you qualify for the 110% safe harbor rule (since your AGI is likely over $150k). If you can pay 110% of last year's total tax liability through withholding or estimated payments, you can completely avoid penalties regardless of how much you owe this year from the conversion. Another angle - since you mentioned needing to sell investments to make quarterly payments, have you considered increasing withholding from any W-2 income instead? The IRS treats withholding as if it was paid evenly throughout the year, even if you increase it heavily in Q4. This could let you avoid both the penalty and the need to liquidate investments with capital gains. The math on your approach could definitely work if your investments outperform the penalty rate, but the safe harbor route might give you the best of both worlds - keep your money invested AND avoid penalties entirely.