Comments on: Declaring Savings Bond interest annually http://www.savings-bond-advisor.com/declaring-interest-on-unredeemed-bonds/ Sun, 18 May 2008 11:40:08 +0000 http://wordpress.org/?v=2.0.4 by: gustav http://www.savings-bond-advisor.com/declaring-interest-on-unredeemed-bonds/#comment-17992 Sat, 22 Mar 2008 17:06:35 +0000 http://www.savings-bond-advisor.com/declaring-interest-on-unredeemed-bonds/#comment-17992 A little heads up for anyone paying interest annually: When you do cash the bonds, be sure to record on your tax return BOTH the total interest on the bonds as well as the last years' contribution, i.e.: Interest on US Savings bonds - $XX.XX Less: interest previously reported - ($YY.YY) Net interest on US Savings bonds - $ZZ.ZZ The reason for this is to avoid a letter audit. The bank where you cashed the bonds will have reported the total interest on its 1099, and if the IRS fails to see that amount on your return they will call you on it. This happened to us last year when my wife cashed in some bonds she'd had since childhood. We were able to fix the problem fairly easily, but you can save yourself a bit of trouble by remembering to "show your work" on your return. A little heads up for anyone paying interest annually:

When you do cash the bonds, be sure to record on your tax return BOTH the total interest on the bonds as well as the last years' contribution, i.e.:

Interest on US Savings bonds - $XX.XX
Less: interest previously reported - ($YY.YY)
Net interest on US Savings bonds - $ZZ.ZZ

The reason for this is to avoid a letter audit. The bank where you cashed the bonds will have reported the total interest on its 1099, and if the IRS fails to see that amount on your return they will call you on it. This happened to us last year when my wife cashed in some bonds she'd had since childhood.

We were able to fix the problem fairly easily, but you can save yourself a bit of trouble by remembering to "show your work" on your return.

]]> by: Am I an accrual or cash method taxpayer?: Savings-Bond-Advisor http://www.savings-bond-advisor.com/declaring-interest-on-unredeemed-bonds/#comment-239 Fri, 24 Mar 2006 17:25:50 +0000 http://www.savings-bond-advisor.com/declaring-interest-on-unredeemed-bonds/#comment-239 [...] Accrual method taxpayers, on the other hand, are required to report Savings Bond interest income annually. In addition, there are some other situations in which in makes sense to pay the tax annually. For more information on why and how to do this, see my post on how to declare Savings Bond interest each year. [...] […] Accrual method taxpayers, on the other hand, are required to report Savings Bond interest income annually. In addition, there are some other situations in which in makes sense to pay the tax annually. For more information on why and how to do this, see my post on how to declare Savings Bond interest each year. […]

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