Just wanted to add another important consideration - if you become a resident alien after your F1 exempt period, you might also need to deal with state tax implications. Some states have their own rules for determining residency that might differ from federal tax residency. I learned this the hard way when I became a federal resident alien but my state (California) considered me a resident for state tax purposes much earlier due to different criteria. This meant I had to file amended state returns and pay additional state taxes on income I thought was exempt. Each state has different rules, so definitely research your specific state's requirements once you determine your federal status changes.

This is such valuable information - thank you everyone for sharing your experiences! I'm in a similar situation as an F1 student approaching my 5th year, and I had no idea about some of these complications like FBAR requirements and state tax differences. One thing I'm curious about: if you become a resident alien for tax purposes but are still on F1 status for immigration purposes, does this create any conflicts? I've heard some people worry that filing as a resident alien might somehow affect their visa status or future applications, since F1 is technically a "non-immigrant" visa. Has anyone dealt with this concern or gotten clarification from immigration attorneys about whether tax residency status affects immigration status? Also, for those who've gone through this transition, did you notice a significant difference in your tax liability when switching from 1040NR to 1040? I'm trying to budget for potential changes in what I'll owe.

Can we talk about how ridiculously complicated this whole process is? I mean, why on earth do they use cryptic codes like BP and 8B instead of just clearly stating what each distribution is? And why doesn't tax software correctly handle these common situations? I had a similar issue last year with an excess contribution to my Roth IRA (different from your 401k situation but similar principle) and ended up paying hundreds to a CPA just to fix what should be straightforward. The tax code is deliberately made confusing so that average people mess up and either overpay or have to hire expensive help.

I just went through this exact situation with my Roth 401k excess contributions! The confusion is totally understandable - these distribution codes are incredibly confusing even for tax professionals. Here's what I learned after dealing with this mess: You're absolutely right that you don't need to amend your 2020 return. The BP-coded distribution represents the return of your already-taxed Roth contributions, so it shouldn't be taxable in 2021 either. The 8B-coded distribution is the earnings on those excess contributions, which IS taxable in 2021. The tricky part is getting TurboTax to handle this correctly. What worked for me was: 1. Enter both 1099-Rs as normal 2. For the BP form, look for an "override" or "adjust" option when TurboTax tries to add it to taxable income 3. Force the taxable amount to remain $0 for the BP distribution 4. Let TurboTax handle the 8B form normally since it's correctly treating that as taxable One thing that helped me understand this better was realizing that when your plan fails ADP testing (which sounds like what happened to you), they have to return contributions even from non-highly compensated employees to bring the plan back into compliance. It's not your fault - it's a plan-wide issue. Don't skip reporting the BP form entirely - you need to report it but ensure it's not taxed twice. The IRS expects to see both 1099-Rs on your return even if one isn't taxable.

I'm going through almost the exact same situation! Got my 570 code on March 4th and the 971 just appeared yesterday. This is also my first year claiming CTC for my daughter, so it sounds like we're in the same boat with the verification process. Reading through everyone's experiences here is really reassuring - it seems like this 2-3 week timeline from 570 to 846 is pretty consistent. @Mei Liu, your tracking of the Thursday update patterns is super helpful! I've been obsessively checking my transcript daily, but now I know to focus on Thursday mornings. @Dylan Cooper, the PCS timing stress is real! I'm not military, but we're relocating for my job next month too. The Form 8822 advice from others here is solid - I just submitted mine online yesterday to be safe. One thing I noticed from reading all these responses is how much the IRS communication could be improved. Having codes appear with no explanation really adds unnecessary anxiety to an already stressful process. At least this community fills in the gaps! Keeping my fingers crossed we both see those 846 codes soon! 🤞

I'm in a very similar situation and this thread has been incredibly helpful! Got my 570 code on March 6th and just saw the 971 appear this morning. This is also my first time claiming CTC for my two kids, so it sounds like we're all going through the same verification process. What's really reassuring is seeing the consistent timeline patterns everyone is sharing - the Thursday update cycle seems pretty reliable based on @Mei Liu's tracking. I've been checking my transcript obsessively every day, but now I know to focus on Thursday mornings! The military PCS situation adds extra stress to an already anxiety-inducing process. I'm not military myself, but I can imagine how challenging it must be to coordinate a move while waiting for your refund. The Form 8822 and Taxpayer Advocate Service suggestions from others here are really valuable. One thing that strikes me from reading all these experiences is how much clearer the IRS could make this process. Having mysterious codes appear with no explanation really amplifies the stress. At least we have this community to help decode what's actually happening! Fingers crossed we all see those 846 codes soon. Based on everyone's timelines, it sounds like we're right on track for resolution in the next week or two! 🤞

I've been doing exactly what you're thinking about for the past two years, and it's definitely possible but requires careful planning. Here's what I learned: First, you can't completely eliminate withholding for Social Security and Medicare taxes - those are mandatory FICA taxes that must be withheld from your paycheck. But you can significantly reduce or eliminate federal and state income tax withholding. The key is making sure you stay within the safe harbor rules to avoid penalties. I calculate 110% of last year's total tax liability (since my income is over $150k) and divide that by 4 for my quarterly estimated payments. This guarantees no underpayment penalty even if I owe more at filing time. I keep all my tax money in a separate high-yield savings account that I never touch except for quarterly payments. Last year I earned about $380 in interest that I wouldn't have gotten with normal withholding. Not life-changing money, but it's something. The biggest challenge is the discipline aspect - you have to be religious about setting aside the money and making those quarterly payments on time. I use automatic transfers on payday so I never see the money as "mine." One tip: start conservatively your first year. Better to overwithhold slightly and get a refund than face penalties. You can always optimize more in subsequent years once you understand your tax situation better.

Just wanted to add a perspective from someone who works in payroll - we see employees try this fairly regularly, and there are a few practical considerations to keep in mind. When you submit a new W-4 to reduce withholding, your HR/payroll department might flag it for review, especially if it's a dramatic change. Some companies have policies requiring manager approval or additional documentation for significant withholding adjustments to protect themselves from liability. Also, be prepared for your final paycheck calculations to be more complex. If you're not having taxes withheld throughout the year, your year-end W-2 might look unusual, which could trigger questions if you ever need income verification for loans, etc. One thing that's worked well for some of our employees is a middle-ground approach: reduce withholding to the minimum safe amount (maybe 80-85% of expected liability) rather than going to zero. This gives you most of the benefit of earning interest on your money while keeping some automatic withholding as a safety net. The quarterly payment system works great if you're disciplined, but I've seen people get into trouble when life happens - unexpected expenses, forgetting payment due dates, or miscalculating their liability. Having some withholding gives you a buffer against these risks.

Has anyone used TurboTax to amend their return when they had these weird codes? I'm in a similar situation with code 290 and need to submit an amendment but worried it'll mess things up more.

I went through almost the exact same situation last year! The 290 code combined with your audit being reversed is actually really good news. Here's what likely happened: When you filed your amended return right around the time of the audit, it created a processing conflict in the IRS system. The 290 code you're seeing is the IRS making an adjustment to reconcile your original return with the audit findings (which were then reversed) and your amendment. The fact that you now see code 846 (as you mentioned in your follow-up) means your refund has been approved and is being issued. That date is when the Treasury will send the payment - usually takes 1-3 business days to hit your bank account if you have direct deposit set up. For your stimulus payments, definitely claim the Recovery Rebate Credit on your 2022 return. Since your 2021 return was tied up in processing, you likely didn't receive the payments that were based on that return. The IRS will cross-reference what you've already received and give you credit for any missing amounts. One tip: keep checking your transcript weekly because sometimes additional codes appear that give you more details about processing timelines. After dealing with this mess for over a year, seeing that 846 code must feel amazing!