The I Bond Thread

[Gearhead Jim]

DW and I established new TD accounts this month and have each purchased our $10k limit of Ibonds. As everyone said, easy-peasy.

We will also do the purchase of $5k paper Ibonds with our tax refund, and another $20k Ibonds early next year.

So in a period of about three months we will have purchased $45k of IBonds.
Ask me in ten years if that was a good idea...

 

[PaunchyPirate]

I had ignored the I-Bond topic until recently, but am now wondering if it makes sense to start buying them. I get the financial aspect of them.

But as a single person, age 60, who will be relying on my intelligent niece (in her 40s) to sort out my financial estate upon my death, I'm wondering if it would be an unnecessary complexity added to my nest of brokerage and savings accounts.

I was reviewing how to set up beneficiaries for individual I-Bonds. It looks like I can "register" them as "Owner and Beneficiary". I would probably just make my niece the beneficiary and consider them to automatically go to her rather than be thrown into the estate pool which would be divided between my 10 heirs. At least until I would have enough I-Bonds to make it substantial to the estate. This would be part of her compensation for doing the estate work.

Does anyone know if I were to set her up as the beneficiary, would I need to know HER social security number? The TD website help doesn't show the registration screens. I'd rather not have to ask her for her SS#.

Closing out this question by answering myself…. I opened my TD account this week and purchased my first bond. Looking at the Beneficiary Registration, it does indeed need the SS# of the beneficiary. I have asked my niece for her #.

 

[Done]

I was able to open and fund three accounts online, including a trust account, without mailing any paperwork. Followed the advice on naming the trust account given in the Finance Buff article linked earlier.

According to Pub 550, there are two ways of paying income taxes on these bonds:
Method 1. Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature.
Method 2. Choose to report the increase in redemption value as interest each year.

I'm trying to pull income into earlier retirement years to minimize the tax torpedo, so I believe Method 2 makes more sense for me. For those using this method, how do you document and report this each year? I can print a TreasuryDirect Current Holdings Summary at the beginning (?) of each year and report the growth in Current Value, but this seems rather unofficial and error-prone. Is there a better way? Do I then manually enter this amount into my return as if it had been reported on 1099-INT, box 3?

My heirs or I will also need to remember to subtract the already-taxed interest when the bond is finally redeemed.

 

[PaunchyPirate]

I was able to open and fund three accounts online, including a trust account, without mailing any paperwork. Followed the advice on naming the trust account given in the Finance Buff article linked earlier.

According to Pub 550, there are two ways of paying income taxes on these bonds:
Method 1. Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature.
Method 2. Choose to report the increase in redemption value as interest each year.

I'm trying to pull income into earlier retirement years to minimize the tax torpedo, so I believe Method 2 makes more sense for me. For those using this method, how do you document and report this each year? I can print a TreasuryDirect Current Holdings Summary at the beginning (?) of each year and report the growth in Current Value, but this seems rather unofficial and error-prone. Is there a better way? Do I then manually enter this amount into my return as if it had been reported on 1099-INT, box 3?

My heirs or I will also need to remember to subtract the already-taxed interest when the bond is finally redeemed.

Have you found this info on reporting the interest yet? Look at the sections near the bottom of the page.

https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_itaxconsider.htm#report

 

[Done]

Have you found this info on reporting the interest yet?

Thanks, this shows how to subtract the already-taxed interest upon redemption. TurboTax has an option for the 1099-INT "We need to adjust the taxable amount: This savings bond interest was previously reported" which seems to handle this correctly.

 

[PaunchyPirate]

Thanks, this is for subtracting the already-taxed interest upon redemption. TurboTax has an option for the 1099-INT "We need to adjust the taxable amount: This savings bond interest was previously reported" which seems to handle this correctly.

That section also says, “Whether you are reporting interest at the end of the bond's life or every year, you report the interest from your bonds on your federal income tax return on the same line with other interest income.”

I believe this answers your question “Do I then manually enter this amount into my return as if it had been reported on 1099-INT, box 3?”

I infer that they leave it up to you to figure out how much interest was earned in the year.

 

[Done]

I Bond rate 11/2021

That section also says, “Whether you are reporting interest at the end of the bond's life or every year, you report the interest from your bonds on your federal income tax return on the same line with other interest income.”

At least in TurboTax, the easiest way to accomplish this is to pretend I receive a 1099-INT (with value in box 3) each year. This way, it will also remove the interest from state taxes. It just seems rather loosey-goosey for tax reporting.

 

[24601NoMore]

Well, I just tried to open up a TD account for me and for my wife. My account - no problem. Her account (even though I entered everything correctly) came back with the dreaded "We can't verify your information..snail mail us this wonderful FS Form 5444 AFTER you get an official signature confirmation from a Bank or similar entity") error.

Anyone know a way around this, like trying to register a different way?

Frustrating, as there's likely no way this will get processed in time for us to buy iBonds for her account in calendar year 2021..UGH.

 

[steelyman]

Anyone know a way around this, like trying to register a different way?

Frustrating, as there's likely no way this will get processed in time for us to buy iBonds for her account in calendar year 2021..UGH.

I’d guess unlikely for 2021. But don’t procrastinate for 2022, you’ll still get the current rates. It’s good that it’s a one time hurdle.

 

[Sunset]

Well, I just tried to open up a TD account for me and for my wife. My account - no problem. Her account (even though I entered everything correctly) came back with the dreaded "We can't verify your information..snail mail us this wonderful FS Form 5444 AFTER you get an official signature confirmation from a Bank or similar entity") error.

Anyone know a way around this, like trying to register a different way?

Frustrating, as there's likely no way this will get processed in time for us to buy iBonds for her account in calendar year 2021..UGH.

No worries, you don't miss out on anything.
She will still get the 7.x% for 6 months, just like you will get it, only her switch to the new rate which will be after the 6 months will be delayed for a few weeks but then she will get it for the full 6 months.

So she hasn't missed anything, and will just be on a slightly delayed time-table.

 

[Dabbler]

No worries, you don't miss out on anything.
She will still get the 7.x% for 6 months, just like you will get it, only her switch to the new rate which will be after the 6 months will be delayed for a few weeks but then she will get it for the full 6 months.

So she hasn't missed anything, and will just be on a slightly delayed time-table.

But . . . she will not be able to purchase TWO $10k iBonds at that same 7.x% rate: one in December 2021 (for calendar year 2021) and one in January 2022 (for calendar year 2022)

 

[24601NoMore]

But . . . she will not be able to purchase TWO $10k iBonds at that same 7.x% rate: one in December 2021 (for calendar year 2021) and one in January 2022 (for calendar year 2022)

Exactly. That's indeed what we'll miss out on.

 

[Sunset]

But . . . she will not be able to purchase TWO $10k iBonds at that same 7.x% rate: one in December 2021 (for calendar year 2021) and one in January 2022 (for calendar year 2022)

Ahhhh.... I missed that...

This just reaffirms my belief that when dealing with gov't workers, to never wait for the last moment as it will take a LONG time to be accomplished.

 

[steelyman]

I realized you can schedule a purchase in advance at Treasury Direct (it’s easy once your account is established). I’ve just scheduled an I Bond purchase for January 2022.

That way I won’t forget (but you need to make sure that the funds are in the linked bank account).

 

[skyking1]

Thanks, I just got onboard with this. I won't do the scheduled purchase because I keep my linked account pretty low.

 

[xlf11]

Just an reminder that you buy before the end of month will be treated as if you buy at the 1st.

 

[skyking1]

the first of this month, or the following month?

 

[Dash man]

I Bond rate 11/2021

the first of this month, or the following month?

The first of the month the bond was purchased in. Buy on Dec 27, will get interest as if you bought on Dec 1.

 

[xlf11]

It's best to buy on TD website within a few working days before the end of the month as it takes at least one working day for TD to process your order.

 

[DallasGuy]

Question: The bank account I have linked to my treasury account no longer exists. So I plan to add 2 new bank accounts. Both are at 2 separate online banks. When I fill out the form to add bank(s), I need to get it signed by an "authorized certifying officer". Does that person have to be an "authorized certifying officer" for the bank(s) I'm adding or can they be from any bank or credit union? Can I used my credit union "authorized certifying officer" to sign for my 2 online banks? Is the authorized certifying officer mainly just used to certify that it is me signing the form?

I'm not sure if I'm asking this question correctly, but any help would be appreciated. Thanks.

 

[steelyman]

I used a local credit union of which I am a member to get the signature authorization. It is not the CU that has my linked Treasury Direct account. There was no problem.

 

[DallasGuy]

I used a local credit union of which I am a member to get the signature authorization. It is not the CU that has my linked Treasury Direct account. There was no problem.

Thanks....I'll try to do the same!

 

[Dabbler]

@ DallasGuy

You may find better success by adding THREE banks: your two online ones, plus the credit union. That way, the credit union has some "incentive" to sign. Also, note that you'll need something very official, not just a rubber stamp. My first go-round with adding banks was rejected by the Feds, so I had to go back a second time, and have my bank re-sign with some specialized green ink.

Sorry, I don't recall the details, or names of these things. But it was quite a drawn out, and disappointing process, until I got it right! Hope the suggestions / hints above help.

 

[MandM]

@ DallasGuy

You may find better success by adding THREE banks: your two online ones, plus the credit union. That way, the credit union has some "incentive" to sign. Also, note that you'll need something very official, not just a rubber stamp. My first go-round with adding banks was rejected by the Feds, so I had to go back a second time, and have my bank re-sign with some specialized green ink.

Sorry, I don't recall the details, or names of these things. But it was quite a drawn out, and disappointing process, until I got it right! Hope the suggestions / hints above help.

Yes it is called a Medalion Guarantee and it is a green stamp. If it is not green or a black and white copy it will likely be rejected.

Sent from my SM-G955U using Early Retirement Forum mobile app

 

[skyking1]

thanks for the heads up I got an account for DW and I opened and funded in time.