I'm dealing with a similar situation right now as a federal employee taking graduate courses. One thing that helped me was requesting a detailed breakdown from HR showing exactly how they calculated the taxable portion. In my case, they had mistakenly included some fees that should have been excluded (like student activity fees and parking passes) which reduced my taxable benefit by about $800. Also, make sure they applied the $5,250 annual exclusion correctly - some payroll departments mess this up if you have courses spanning multiple calendar years. You might also want to keep detailed records of any out-of-pocket expenses you paid (books, supplies, etc.) since these could qualify for education credits even if the tuition itself was employer-paid. The IRS allows you to claim credits on qualified expenses even when the tuition was covered by your employer's taxable benefit. Don't panic too much - yes, you'll owe taxes on that amount, but it's not like you have to come up with $27k in cash. It just gets added to your regular income and taxed at your marginal rate.

Based on my experience working in tax preparation, here are a few key points that might help with your situation: First, double-check that your employer applied the $5,250 annual exclusion correctly. Sometimes HR departments make errors, especially if your courses spanned multiple tax years or if you had other educational benefits during the year. Second, the fact that you work at a state college might actually work in your favor. If any of your MBA coursework can be demonstrated as directly maintaining skills required for your current position (rather than preparing you for advancement), there may be grounds to argue for different tax treatment on those specific courses. Third, keep detailed records of ALL your out-of-pocket expenses - not just the 10% tuition you paid, but books, required software, lab fees, etc. These qualified education expenses can be used for the Lifetime Learning Credit even when the tuition itself was covered by a taxable employer benefit. Finally, consider consulting with a tax professional who specializes in education benefits. The rules around working condition fringe benefits versus educational assistance can be complex, and $27k in additional taxable income is significant enough to warrant professional guidance to ensure you're not overpaying. The good news is that this gets added to your regular income and taxed at your marginal rate - you're not facing a $27k tax bill, just the incremental tax on that amount.

Has anyone actually had the IRS question their handling of 402G excess contributions? I'm wondering if this is something they typically flag for review or if it's pretty routine for them.

I went through this exact same situation two years ago and can confirm everything that's been said here is correct. The key thing to remember is that the IRS treats 402G excess contributions returned before April 15th very differently from those returned after the deadline. Since you got your excess contribution back by mid-March, you're in the clear for the better treatment. The $364 excess amount won't be taxed again since it was already included in your 2023 W-2 income. Only any earnings on that amount during the time it was in your account will be taxable on your 2024 return. One tip for TurboTax - when you get to the section about the 1099-R, make sure you answer "Yes" when it asks if this was a return of excess contributions or similar language. The software is pretty good at handling this once you give it the right context. Also keep good records of the whole situation including any correspondence with your plan administrators, just in case you ever need to explain it later. The fact that you caught this and corrected it relatively quickly shows you're being responsible about your retirement contributions. Don't stress too much about it - this happens to a lot of people when they change jobs!

I'm completely new to this community but wanted to share my experience to help others going through code 841! My direct deposit was rejected by PNC Bank just 5 days ago (refund was $6,800, their daily limit was $5,000), and code 841 appeared on my transcript 3 days ago. Reading through this entire thread has been absolutely incredible - everyone's real experiences and consistent timelines have completely calmed my nerves! It's amazing how helpful this community is compared to trying to understand the vague IRS website information. @Brooklyn Foley - I really hope your check arrived safely by now! Your original question created such a valuable resource thread that's helping so many of us newcomers understand this confusing process. Based on all the detailed experiences shared here, I'm now confident that: • The paper check conversion is completely automatic (no calls or forms needed) • Timeline is consistently 10-15 days from when code 841 appears • Check comes from "U.S. TREASURY" with "BUREAU OF THE FISCAL SERVICE" return address • White envelope clearly marked as important tax documents • WMR status probably won't update to show paper check This community is absolutely amazing for getting real answers from people who've actually lived through these situations. The consistency in everyone's timelines (10-15 days) is so reassuring and shows the system really does work reliably, even if the waiting is stressful when you need your money. Thanks to everyone who took the time to share their experiences and timelines - it makes navigating this confusing tax situation so much easier for newcomers like me!

I'm new to this community but wanted to share my recent experience with code 841 to help others in similar situations! My direct deposit was rejected by Ally Bank about 2 weeks ago when my $5,200 refund exceeded their daily mobile deposit limit of $5,000. Here's my timeline: • Code 841 appeared on transcript: March 25th • Paper check arrived: April 8th (exactly 14 calendar days) • Completely automatic - no phone calls or paperwork needed @Brooklyn Foley - I hope your check has arrived by now! Based on when you posted and all the consistent timelines shared here, you should have received it already. The waiting is definitely stressful, but everyone's experiences show the Treasury Department handles these conversions reliably. A few things that helped me during the wait: - The check comes in a white envelope from "U.S. TREASURY" - Return address shows "BUREAU OF THE FISCAL SERVICE" - Clearly marked as important tax documents (hard to miss!) - My WMR tool never updated to show paper check status This community has been incredibly valuable for understanding these confusing tax situations. Reading real experiences from people who've actually been through this process is so much more helpful than the generic IRS website explanations. The 10-15 day timeline seems very consistent across everyone's experiences, which shows the automatic system really does work - it just requires patience when you need your money right away! Thanks to everyone who shared their timelines and details. It makes navigating these stressful situations so much easier for newcomers like me!

I've been following this thread and wanted to share some additional resources that might help. If you're struggling to get through to the IRS directly, you can also try contacting the Taxpayer Advocate Service (TAS) - they're an independent organization within the IRS that helps taxpayers resolve problems. You can reach them at 1-877-777-4778 or through their website. For your Optima situation, many states have specific consumer protection laws regarding tax resolution services. Check with your state's consumer protection agency - some states require these companies to provide detailed refund policies or have mandatory cooling-off periods. Also, if you paid with a credit card, you might be able to dispute the charges, especially if you can document that services weren't provided as promised. Credit card companies are often more willing to help with disputes involving service companies that don't deliver. The most important thing is don't let this experience delay dealing with your actual tax issue. The IRS is actually quite reasonable to work with directly, and an installment agreement can often be set up online in minutes for a small setup fee - no need for expensive middleman companies.

I'm really sorry you're going through this - the combination of tax stress and realizing you may have been taken advantage of is incredibly overwhelming. You're definitely not alone, and the fact that you're taking action now shows good judgment, even if you feel like you made a mistake initially. Here's what I'd recommend based on similar situations I've seen: 1. **Get your IRS transcripts immediately** - Go to irs.gov and create an online account to view your actual tax debt. This will show you exactly what you owe versus what Optima claims you owe. Many people discover significant discrepancies here. 2. **Document everything** - Every payment, phone call, email, and promise they've made. Create a timeline of what they said they'd do versus what actually happened. 3. **Review your contract carefully** - Look for cancellation clauses and refund policies. Many states have specific laws about tax resolution services that may work in your favor. 4. **Cancel in writing** - Send a formal cancellation letter/email with read receipt. Be specific about wanting to terminate all services immediately. 5. **File complaints** - Report them to your state's attorney general, the FTC, and the Better Business Bureau. Even if you don't get money back, it helps build a case for others. The good news is you've already contacted an EA/CPA, which is exactly the right move. They can typically resolve in weeks what companies like Optima drag out for months. You're going to get through this!

One thing nobody mentioned - if she's generating income from the parking lot, she needs to report that on Schedule E as rental income. But if she's actively managing it (like a parking business with attendants, etc.), it might need to go on Schedule C and be subject to self-employment tax. Big difference tax-wise!

Great advice everyone! Just to add one more consideration - make sure your sister keeps detailed records of any expenses related to the parking lot (maintenance, repairs, insurance, etc.) as these can be deducted against the rental income. Also, if she decides to make any improvements like adding lighting, security cameras, or resurfacing, those improvements would also be depreciable assets separate from the original paving. Since she's new to this, I'd really recommend consulting with a tax professional who specializes in real estate to make sure she's maximizing all available deductions and handling the depreciation correctly. The rules can get complex, especially with inherited property, and getting it right from the start will save headaches later during audits or when she eventually sells.