Reporting I Bond taxable interest annually. How to determine the amount?

[Dufferin]

I have chosen to pay interest annually on my I Bonds rather than paying it all at the time of redemption. To keep it simple I just take the difference between the current value and the value at the previous year end. I know this is probably a little understated due to timing of the interest being calculated & applied. Plus the fact that they don’t include the last 3 months of interest. Does accuracy really matter? When the bond matures or is redeemed the taxable interest gets trued up any way.

 

[Sunset]

The first time you claim interest it would be: (value at Jan 3) - (purchase value)
From then on each year it's as you say: Jan 3 current value - value from previous year.

I do use a spreadsheet to track, because I want some record in case years later the IRS asks.

 

[Sunset]

The last 3 months of interest does not show as it's the penalty built in, until the 5 years is up. (I believe).

 

[pb4uski]

eyebonds.com show the value month by month.

 

[RE2Boys]

eyebonds.com show the value month by month.

I think you meant : eyebonds.info

Info on determining the interest earned each year is also disccussed at:

https://tipswatch.com/2023/02/21/i-bonds-heres-a-simple-way-to-track-current-value/

 

[mrfeh]

I assume TreasuryDirect provides a 1099, don't they?

 

[Gumby]

I assume TreasuryDirect provides a 1099, don't they?

Only after you have redeemed. Not for bonds that have not yet been redeemed.

 

[mrfeh]

Only after you have redeemed. Not for bonds that have not yet been redeemed.

Even if you've told them to tax your bond annually?

 

[Gumby]

Even if you've told them to tax your bond annually?

It's on you to report yearly interest to the IRS and keep track of the taxes you pay. Treasury doesn't do it. Nor do they withhold for you.

Here's some good information from Treasury Direct:

Reporting the interest every year
You may choose to report the interest every year. For example, you may find it advantageous to report interest every year on savings bonds in a child's name. The child may be paying taxes at a lower rate than will be true years later when the bond matures.

But you will not get a 1099-INT every year. You only get a 1099-INT at the end.

If the savings bonds are in a TreasuryDirect account, you can see the interest earned each year in the account.
If the savings bonds are on paper, our Savings Bond Calculator can help you figure out the interest to report.
When you get the 1099-INT at the end, it will show all the interest the bond earned over the years. For instructions on how to tell the IRS that you already reported some or all of that interest in earlier years, go to IRS Publication 550 and look for the section on U.S. Savings Bonds.

(emphasis mine)

https://www.treasurydirect.gov/savings-bonds/tax-information-ee-i-bonds/

 

[pb4uski]

I think you meant : eyebonds.info

Info on determining the interest earned each year is also disccussed at:

https://tipswatch.com/2023/02/21/i-bonds-heres-a-simple-way-to-track-current-value/

Yes. Since I have already visited the site I just type "eyebonds" into my broswer and it takes me there. I didn't realize that it was not .com

 

[mrfeh]

It's on you to report yearly interest to the IRS and keep track of the taxes you pay. Treasury doesn't do it. Nor do they withhold for you.

Here's some good information from Treasury Direct:

(emphasis mine)

https://www.treasurydirect.gov/savings-bonds/tax-information-ee-i-bonds/

Interesting.

I'm wondering what the purpose is of telling TD to treat interest annually if the 1099 at time of maturity/sale always includes all interest earned since purchase.

 

[pb4uski]

Interesting.

I'm wondering what the purpose is of telling TD to treat interest annually if the 1099 at time of maturity/sale always includes all interest earned since purchase.

In short 1099s are issued as if most taxpayers elect to defer taxes until maturity or redemption, which is probably what most taxpayers do and prefer.

The law gives taxpayers the option of recognizing interest as earned if they wish to however if they elect to do so then they are responible for keeping records proving that they have done it correctly.

I don't see any problem with that.

 

[Sunset]

Interesting.

I'm wondering what the purpose is of telling TD to treat interest annually if the 1099 at time of maturity/sale always includes all interest earned since purchase.

Where do you get the idea that you tell TreasuryDirect to treat interest annually

One advantage of their system is, you can accumulate the interest for say 10 years while working down an inherited IRA, and then turn around and in the 11th year claim all the accumulated interest and claim annually from then on.

 

[mrfeh]

Where do you get the idea that you tell TreasuryDirect to treat interest annually

I read somewhere that one can instruct TD whether to treat the interest as annual income or to wait until maturity/sale.

Apparently that was incorrect.

 

[audreyh1]

I read somewhere that one can instruct TD whether to treat the interest as annual income or to wait until maturity/sale.

Apparently like that was incorrect.

You can’t instruct TD this tax treatment. But you can inform the IRS that you are using the annual tax treatment in which case you keep all the records.

TD treats it as just one all interest deferred method and issues 1099-INTs only for years when IBonds are redeemed or mature.

 

[RE2Boys]

Remember that if one chose to report the interest of I or EE bonds on an annual basis, you must use this method for ALL I and EE bonds held by that SSN. You can't select the annual interst reporting on only some of your savings bonds.

https://www.treasurydirect.gov/savings-bonds/tax-information-ee-i-bonds/