State Treasurers push for new Savings Bond legislation
Monday, April 16th, 2007
Categorized as: Stinker bonds
Reading between the lines of Finding a home for lost bonds, an article in Saturday's Milwaukee Journal Sentinel by Stacy Forster, state Treasurers have apparently given up their suit over unclaimed Savings Bonds in favor of new legislation.
State Treasurers are responsible for returning unclaimed property to its owners. What really motivates them, however, is that if they can't find the owner, the state gets to keep the property. Since the amount of unredeemed Savings Bonds now tops $14.75 billion, the states would like to get their hands on the money.
Under current law, a Savings Bond can be redeemed by its owner or its owner's heirs at any time - even years after it has stopped paying interest. It appears the state Treasurers are trying to change that law.
When asked, people who hold these stinker bonds say they don't want to cash them because of tax issues. The financial ignorance of this position is astounding - it's far more costly to give the government a long-term interest-free loan than to cash the bonds, hold back the money needed for taxes, and reinvest what's left.
Unfortunately, that's the one issue the Milwaukee Journal Sentinel's article didn't address.
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Technically, savings bond interest is taxable in the year of maturity, whether the bonds are redeemed or not.
It's unlikely that the IRS will catch anyone who redeems late, as the 1099-INT's show the payment year, not the maturity date.
Bro Chuck - actually, you can't depend on the 1099-INT having the current tax year on it.
Some of the places that redeem Savings Bonds backdate the tax-year on the 1099 to the year the bond stopped paying interest.
When that happens, the owner has to file an amended tax return for that year.
Tom Adams