problems with I-Bonds purchased through IRS Tax Return

[Dimsumkid]

I'm not sure if anyone used this option, but I did. I Filed online by April 17, 2012, IRS received my excess payment on April 18. I was expecting April 2012 bonds w/3.06% rate instead, I got May 2012 bonds w/2.2% rate. I bought $5k worth, even paid the extra on top of my tax refund to get there.

The Treasury dept states it's when they get payment from the IRS, not when they receive payment from you! So, the IRS needed 2-3 weeks to process an online tax return and didn't make the payment until May 2,2012. The problem is, no one at the IRS seems to know what to do other than write a letter to the IRS Service Center regarding this problem to see if it can get corrected (I'm not optimistic that it will get fixed). I've talked to the IRS and Treasury customer service people and both agree there seems to be a "hole" in this process.

If you owe money and pay on time (online or mail), the IRS will backdate the payment based on postmark or online submission, it seems purchasing an I Bond via tax return should hold to the same time stamping. From this experience, I don't think it's worthwhile to bother since the I Bonds change rates on May 1 and the IRS can't seem to process the purchase fast enough for April.

[Texas Proud]

Not being negative here, but I agree with the Treasury....

Who knows for sure if you will get the refund... they do have to process etc. and the money is in a different pot...

Let's say it is a bank... and you overpaid on a loan or a CC and you called up to get it moved to your checking account.... do you think they would pay a check with that excess money before it got into your checking account? I would not...

[powerplay]

The same thing happened to me. I filed online on April 16th and recently received my I bonds which are dated May.

I'll be interested to hear if you are able to get yours changed to reflect an April date.

[Dimsumkid]

Quote:

Originally Posted by Texas Proud Not being negative here, but I agree with the Treasury.... Who knows for sure if you will get the refund... they do have to process etc. and the money is in a different pot... Let's say it is a bank... and you overpaid on a loan or a CC and you called up to get it moved to your checking account.... do you think they would pay a check with that excess money before it got into your checking account? I would not...

I'm not looking for a refund, I got my I Bonds, I just think there's a problem of having to wait to 2-3 weeks for the I Bond to be purchased since the IRS had my money all along, I have proof the pulled my money on April 18 for $3268 of the $5000. I think these bonds should be processed for April, if you want to be exact then, $3200 could be processed for April then the rest for May. I'm not complaining about the Treasury, I think it's an IRS problem here....if you owe and the money is paid but arrives late, it's backdated to the online submission or postmark. Shouldn't they do the same for a refund or overpayment? Just think this process has issues. I don't think there's any incentive to use this process in the future knowing you lose out on the time lag.

[Texas Proud]

Quote:

Originally Posted by Dimsumkid I'm not looking for a refund, I got my I Bonds, I just think there's a problem of having to wait to 2-3 weeks for the I Bond to be purchased since the IRS had my money all along, I have proof the pulled my money on April 18 for $3268 of the $5000. I think these bonds should be processed for April, if you want to be exact then, $3200 could be processed for April then the rest for May. I'm not complaining about the Treasury, I think it's an IRS problem here....if you owe and the money is paid but arrives late, it's backdated to the online submission or postmark. Shouldn't they do the same for a refund or overpayment? Just think this process has issues. I don't think there's any incentive to use this process in the future knowing you lose out on the time lag.

I would agree that the additional money they took should be processed in April...

But, you are talking about two parts of the gvmt... not just the IRS... Sure, the IRS had the money but they did not send it to be invested.... sure, they backdate for penalty purposes to the date on the envelope, but what does that matter? They are just following the law....

I agree that it sounds like a big flaw... but I wonder if the interest rate had been in the other direction if you would think the same?

[Dimsumkid]

Quote:

Originally Posted by Texas Proud I agree that it sounds like a big flaw... but I wonder if the interest rate had been in the other direction if you would think the same?

Sure. Without this situation happening, I still would've thought I'd be buying an April bond. If I knew the old rate was 3.06% and then May was higher, say 3.5%, I would've skipped the IRS option and waited until May to buy. You know the new int. rate well ahead of time going forward.

[SRyan]

Were the rates that high on I bonds? Are these a special offer at tax time?

[Dimsumkid]

Quote:

Originally Posted by SRyan Were the rates that high on I bonds? Are these a special offer at tax time?

I Bonds interest rates are set every 6 months, the rate was 3.06%, but is now 2.2% (May 1)

[Dimsumkid]

Quote:

Originally Posted by powerplay The same thing happened to me. I filed online on April 16th and recently received my I bonds which are dated May. I'll be interested to hear if you are able to get yours changed to reflect an April date.

Powerplay,
I'll give you an update when I do. I have to wait for an IRS printout as written evidence that the IRS received my payment.

Did you happen to get 5k in bonds? Did you get 1 - $5000 bond? Apparently the Treasury ran out of $5k, $1k, $500 and $200 and $100 bonds. This what I got:

4 - $1000 bonds,
1 - $500 bond,
1 - $200 bond,
6 - $50 bonds.

[SRyan]

Quote:

Originally Posted by Dimsumkid I Bonds interest rates are set every 6 months, the rate was 3.06%, but is now 2.2% (May 1)

Are you talking about I Series Savings Bonds? I am seeing a 0% fixed rate for Nov11-May12 and a 0% for May12-Nov-12. I see the inflation rate at 1.10% and 1.53% respectively. Are you talking about TIPS sold at auction?

[Dimsumkid]

Quote:

Originally Posted by SRyan Are you talking about I Series Savings Bonds? I am seeing a 0% fixed rate for Nov11-May12 and a 0% for May12-Nov-12. I see the inflation rate at 1.10% and 1.53% respectively. Are you talking about TIPS sold at auction?

Yes, the I Bond rates are (current) 1.1% is 2.2% annually and (old) 1.53% is 3.06% annually. Looks like you have them listed in the wrong order.

[SRyan]

Oh OK, I see what you're saying. Hope you can get them to fix your bonds.

[powerplay]

Quote:

Originally Posted by Dimsumkid Powerplay, I'll give you an update when I do. I have to wait for an IRS printout as written evidence that the IRS received my payment. Did you happen to get 5k in bonds? Did you get 1 - $5000 bond? Apparently the Treasury ran out of $5k, $1k, $500 and $200 and $100 bonds. This what I got: 4 - $1000 bonds, 1 - $500 bond, 1 - $200 bond, 6 - $50 bonds.

I got $4800 of bonds which was my refund plus $38 deposited into my checking account for the total refund. My I bonds are a mixture of face value also, but by necessity because my total was not $5000.
4 - $1000 bonds,
1 - $500 bond,
6 - $50 bonds.

[trueblue]

I filed in mid-February and still don't have my I-Bonds. I definitely had an expectation that I was going to get the 3.06% rate, but three months later their website says that my return is still being processed (with no estimated date any more, that disappeared long ago).

At this point I figure that whatever exception has occurred in processing my return means I won't get bonds at all and will just get a check

[wanaberetiree]

I am not sure what the difference is.
The rate WAS 3.06% before May 1, 2012 and now it's 2.2%.
The fixed part is and was 0%. Why is it important to have them dated in April vs May?

[JPatrick]

Quote:

Originally Posted by wanaberetiree I am not sure what the difference is. The rate WAS 3.06% before May 1, 2012 and now it's 2.2%. The fixed part is and was 0%. Why is it important to have them dated in April vs May?

What you stated is the difference.
If the bonds are issued prior to May they get 6 months at 3.06% followed by 6 months at 2.2%. By having them issued in May they get 2.2% followed by 6 months of (unknown.)

[thefinancebuff]

Quote:

Originally Posted by Texas Proud Not being negative here, but I agree with the Treasury....

I do too. The IRS first has to process the return and agree with your numbers. Then it would use your refund to buy I Bonds for you. Otherwise they will refund you a different dollar amount. If it was critical for you to get April bonds, you just had to file earlier.