Yes, wife can send in a written withdrawal notification to USCIS at any time requesting that her pending application for COS to H-4 be withdrawn, "effective immediately".
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Yes. Write a letter to USCIS and pray it will not fall on deaf ears.
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The simple answer is yes, you may cancel the request for change of status. But do you understand how your and your wife's status are related and how to ensure that you both maintain legal status? Consult with the attorney who is handling your H-1B or hire a second attorney for you wife.
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