I went through a very similar situation last year and want to share what I learned the hard way. Like you, I withdrew from my 401(k) for a first home purchase and was hoping the first-time homebuyer exemption would apply. Unfortunately, as others have confirmed, that exemption only applies to IRAs, not 401(k) plans. I ended up paying the full 10% penalty on my $28k withdrawal. The distinction between retirement account types is really important and not well understood by most people. However, I did discover a few things that helped minimize the damage: 1. Make absolutely sure your 10% federal withholding is properly credited on your return - this is crucial and sometimes gets missed in tax software 2. Check if you qualify for ANY other exemptions (disability, medical expenses over 7.5% of AGI, higher education expenses, etc.) 3. Consider if the timing of your withdrawal might qualify for the "separation from service after 55" rule if you changed jobs One thing I wish I had known beforehand: if you have both 401(k) and IRA funds available, always withdraw from the IRA first for major purchases like homes. The withdrawal rules are much more flexible. Also, you can potentially do a rollover from 401(k) to IRA before withdrawing, though you need to be careful about timing and plan rules. The silver lining is that you got your house in a good market! Sometimes the financial benefits of timing a purchase right can outweigh the tax penalties, even though they sting.

I'm dealing with a similar situation and wanted to share what I discovered after consulting with a tax professional. While the first-time homebuyer exemption unfortunately doesn't apply to 401(k) withdrawals (only IRAs), there might be one more avenue worth exploring that hasn't been mentioned yet. If your 401(k) plan allows for loans rather than hardship withdrawals, and if you're still employed with the same company, you might be able to retroactively restructure part of this as a loan instead of a withdrawal. Some plans allow this within a certain timeframe, though it's not common and depends entirely on your specific plan rules. Also, double-check the timing of your withdrawal against any job changes. The "separation from service after age 55" exception has been mentioned, but there's also a lesser-known rule about withdrawals made in the same calendar year you separate from service (even if you're under 55) that might apply in very specific circumstances. Given the complexity and the substantial penalty amount you're facing, it might be worth the cost of a one-hour consultation with a tax professional who specializes in retirement distributions. Sometimes they catch exemptions or strategies that general tax software misses. Hope this helps, and congratulations on the house purchase! Even with the tax implications, homeownership in a good market was probably still the right financial move.

My dad and I were in a similar situation last year. We went with the multi-member LLC route with a 75/25 split and it's worked well for us. One thing nobody mentioned yet - make sure your dad is actually providing some services or capital to the business! The IRS doesn't look kindly on "partnerships" where one person is just there for tax benefits without contributing anything.

Just wanted to add my perspective as someone who went through this exact decision process recently. I ended up choosing a multi-member LLC with my mom (70/30 split) and it's been working great for our consulting business. A few practical considerations that helped me decide: First, the multi-member LLC gives you flexibility to adjust profit/loss allocations in your operating agreement if your business circumstances change. Second, you can always convert to S-Corp status later by filing Form 2553 if you reach the profit threshold where it makes sense. One thing that surprised me was how much simpler the bookkeeping is compared to what I expected. Yes, you file Form 1065, but tax software makes it pretty straightforward, and having clear documentation of who contributed what from the start really helps. Make sure you get that operating agreement drafted properly though - it's worth spending a few hundred dollars on a business attorney to get it right rather than using a template. The IRS will scrutinize family partnerships more closely, so having everything documented properly from day one is crucial.

This is exactly what happened to me last year! Got a CP24 notice in July saying I was owed a $1,247 refund for my 2022 taxes, but when I dug through my bank records, they had already deposited that exact amount back in May. The timing disconnect between their refund processing and notice generation systems is so confusing. I spent way too much mental energy worrying about whether I needed to do something or if they'd accidentally send me duplicate money. Turns out it was just their clunky way of saying "hey, we already fixed your return and sent you the correct amount." What helped me was logging into my IRS online account and seeing that my balance was zero with no pending transactions. That confirmed everything was squared away. I kept the CP24 notice filed with my tax documents for that year, but never had to take any action on it. It's frustrating how these notices are written in a way that creates unnecessary anxiety, but at least now I know what to expect if it happens again in future tax years!

I'm going through the exact same thing right now! Just got my CP24 yesterday saying I'm owed $2,847.22, but when I checked my account, that's exactly what they deposited back in March. The notice is dated June, so it definitely came after the refund. Reading through everyone's experiences here is such a relief - I was worried I'd messed something up or that they'd accidentally send me duplicate money and then demand it back later. It's crazy how their different systems don't sync up properly and create all this unnecessary confusion. I'm definitely going to check my IRS online account like several people suggested to make sure everything shows as balanced. And I'll keep this notice with my tax records just in case. Thanks everyone for sharing your stories - makes me feel so much better knowing this timing issue is super common and not something to stress about!

check your mail carefully! sometimes they send letters requesting more info but they look like junk mail ngl

Non-filing letter status usually means your return hasn't been fully processed in their system yet. Since you filed in February, definitely call the IRS taxpayer assistance line at 1-800-829-1040. Have your SSN, filing status, and exact refund amount ready. The hold times are brutal but you need to find out if there's an issue with your return or if it's just stuck in their processing backlog.

Check the master list of transcript codes on the IRS website. They explain what each one means

That "verification of non-filing" notice is actually pretty common when there's a processing delay or system glitch. It doesn't necessarily mean your return is lost - sometimes it just means it hasn't been fully processed into their system yet. The January 2022 date suggests this might be related to the massive backlog they had that year. I'd definitely try calling that number even though it's a pain, or you could try the online "Get My Payment" tool to see if there's any update on your refund status. Don't panic yet - this happens more often than you'd think!