Buying I-bonds with tax refund

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SlowMovingInvestor
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Buying I-bonds with tax refund

Post by SlowMovingInvestor »

I'm about to file my Fed refund and expecting a refund. I was thinking of using the refund to buy I-bonds. I do have a Treasury Direct account, but have never purchased I-bonds with my refund before. Here are the questions I have.

1) This is an MFJ return. I presume the I-bond will come back jointly owned ? Will I be able to convert it to electronic form and have it deposited into the Treasury Direct account that I own individually ?

2) How cumbersome is the conversion process from paper I-bond to electronic ?

3) Will the IRS web site show refund issued when the I-bond is mailed ? If I don't get it, can I ask for a reissue ? Normally, if I have a refund, I just ask for direct deposit so the issue of receiving a mailed check doesn't arise.

4) If your refund is (say) 4297, can you ask for the entire 4297 or only for I-Bond totals that can match a combination of issued denominations and get the rest as a direct deposit ? My refund is < $5000.

Thanks !
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Re: Buying I-bonds with tax refund

Post by Jack FFR1846 »

I can only answer the last question as I ONLY hold paper iBonds. They will send up to the last $25 increment. The rest gets cash refunded however you specify (check or ACH).
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fabdog
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Re: Buying I-bonds with tax refund

Post by fabdog »

1. As long as your SSN is the one it's issued to (even if MFJ, one spouse is "lead" and the bond will come in their SSN) then you can deposit it to your account. You can hold bonds in your individual account that have other co owners on them. See TD instructions for how to do this

2. Depends on your bank. There is a form to fill out, where you make a manifest of the bonds. Then you have to get a medallion or a bank signature guarantee. Some banks no problem.. other banks, it's like asking for the combo to the safe. Then you mail the package off to Minnesota, the bonds will shortly show up in your account

3. No idea.

4. answered above

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Re: Buying I-bonds with tax refund

Post by seymore92 »

fabdog wrote: Tue Jun 30, 2020 2:13 pm 1. As long as your SSN is the one it's issued to (even if MFJ, one spouse is "lead" and the bond will come in their SSN) then you can deposit it to your account. You can hold bonds in your individual account that have other co owners on them. See TD instructions for how to do this

2. Depends on your bank. There is a form to fill out, where you make a manifest of the bonds. Then you have to get a medallion or a bank signature guarantee. Some banks no problem.. other banks, it's like asking for the combo to the safe. Then you mail the package off to Minnesota, the bonds will shortly show up in your account

3. No idea.

4. answered above

Mike
2. I have not needed any medallion guarantee to mail in a manifest and convert paper bonds to electronic. I did this for Tax Year 2018 and 2019 no problem. I don't recall seeing any instruction to have a medallion or bank signature guarantee included.

3. (Will IRS site show when mailed) - Yes, the Where's my Refund tool will indicate the refund is approved and the bonds should arrive in about 3 weeks (I think) and whom to contact (not the IRS) if they don't arrive.

Edit: I found a screenshot of the text, it reads: "You requested that all or part of your refund be used for a US Savings Bond(s) purchase. It may take up to three weeks from the date your refund was sent for your Savings Bonds to arrive in the mail. The Bureau of the Public Debt will mail your bonds to the address shown on your tax return. If you do not receive the savings bond(s) you should contact Treasury Retail Securities at [844 phone number]. The amount not used to purchase bonds is scheduled to be refunded by [date]. If you do not receive the refund by [date + 5 days], please contact us again. We are unable to take any action until then."
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Flobes
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Re: Buying I-bonds with tax refund

Post by Flobes »

SlowMovingInvestor wrote: Tue Jun 30, 2020 1:50 pm I'm about to file my Fed refund and expecting a refund. I was thinking of using the refund to buy I-bonds.

1) This is an MFJ return. I presume the I-bond will come back jointly owned ?

4) If your refund is (say) 4297, can you ask for the entire 4297 or only for I-Bond totals that can match a combination of issued denominations and get the rest as a direct deposit ?
You will file Form 8888. On it, you'll specify how you want your IBonds titled. And you'll detail how much of your refund you want to go to Ibonds, how much to direct deposit, how much to a paper check. Form 8888: Allocation of Refund (Including Savings Bond Purchases)
SlowMovingInvestor wrote: Tue Jun 30, 2020 1:50 pm ...? My refund is < $5000.
If you want the maximum of $5000 in IBonds, you can add $703 to your tax payments. Simplest is via IRS Direct Pay.
SlowMovingInvestor wrote: Tue Jun 30, 2020 1:50 pm 1) Will I be able to convert it to electronic form and have it deposited into the Treasury Direct account that I own individually ?

2) How cumbersome is the conversion process from paper I-bond to electronic ?
Here's Treasury Direct explanation: Convert Your Paper Savings Bonds Using SmartExchange

There are lots of threads here about this process. Type "Converting IBonds" into the Forum searchbox.

Timeframe is at best variable, and is likely very delayed due to current conditions.
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SlowMovingInvestor
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Re: Buying I-bonds with tax refund

Post by SlowMovingInvestor »

fabdog wrote: Tue Jun 30, 2020 2:13 pm 1. As long as your SSN is the one it's issued to (even if MFJ, one spouse is "lead" and the bond will come in their SSN) then you can deposit it to your account. You can hold bonds in your individual account that have other co owners on them. See TD instructions for how to do this
I am not the 'lead' and switching to the lead in TT would be a big headache right now with all my returns (fed + state) done. My spouse isn't interested in opening a TD account at this time. So it looks like it's no go unless my spouse were to open a TD account, or I were to switch 'the lead' in my return ?
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Re: Buying I-bonds with tax refund

Post by Spirit Rider »

SlowMovingInvestor wrote: Tue Jun 30, 2020 2:39 pm I am not the 'lead' and switching to the lead in TT would be a big headache right now with all my returns (fed + state) done. My spouse isn't interested in opening a TD account at this time. So it looks like it's no go unless my spouse were to open a TD account, or I were to switch 'the lead' in my return ?
There is nothing wrong with her holding the paper I Bonds. In fact, some of us Neanderthals prefer them. I have a large wad of I Bonds from ~twenty years ago in my safe.
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Re: Buying I-bonds with tax refund

Post by frostydrink »

SlowMovingInvestor wrote: Tue Jun 30, 2020 2:39 pm
fabdog wrote: Tue Jun 30, 2020 2:13 pm 1. As long as your SSN is the one it's issued to (even if MFJ, one spouse is "lead" and the bond will come in their SSN) then you can deposit it to your account. You can hold bonds in your individual account that have other co owners on them. See TD instructions for how to do this
I am not the 'lead' and switching to the lead in TT would be a big headache right now with all my returns (fed + state) done. My spouse isn't interested in opening a TD account at this time. So it looks like it's no go unless my spouse were to open a TD account, or I were to switch 'the lead' in my return ?
I am in the same situation (not the first name on the 1040) and have been able to order them in my name. Line 5a on Form 8888 can be used to fill in the amount to be used to "buy bonds for yourself, your spouse, or someone else." You can list your name below that for the bond registration on line 5b.
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Re: Buying I-bonds with tax refund

Post by obafgkm »

Jack FFR1846 wrote: Tue Jun 30, 2020 1:54 pm I can only answer the last question as I ONLY hold paper iBonds. They will send up to the last $25 increment. The rest gets cash refunded however you specify (check or ACH).
I believe that the I bonds will be issued in a multiple of $50, actually.

From the US Department of the Treasury:
What denominations are available?

Paper I bonds are issued in denominations of $50, $100, $200, $500, and $1,000, depending on the amount you request.

If you buy $250 or less of savings bonds, we will use $50 denominations to fill your order.

If you buy more than $250 of savings bonds, we will use $50 denominations to fill the first $250 and the fewest possible number of additional bonds for the remainder. For example, if you request $1,000 in paper I bonds, you will receive six $50 bonds, one $200 bond, and one $500 bond.
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Re: Buying I-bonds with tax refund

Post by samjuno »

I had part of my tax refunded in paper I-Bonds(~2 yrs ago)- never again! I got so many $50 bonds since I requested >$1k in paper bonds. Treasury is trying to deplete their stock of paper bonds and I assume they didn't have anymore of the larger denominations. Unless they've re-stocked & you just want smaller denominations- I would just get the refund in cash and buy them via TD.

I've already converted some paper I-Bonds into TD bonds, and the process went fine, but I dread doing it with the stack of paper $50 bonds. I vaguely recall changing the beneficiary of the converted bonds was my main reason for making the conversion. Would have just cashed them, but they from the old days when the fixed rates were higher.
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Re: Buying I-bonds with tax refund

Post by Spirit Rider »

samjuno wrote: Wed Jul 01, 2020 9:45 pm I had part of my tax refunded in paper I-Bonds(~2 yrs ago)- never again! I got so many $50 bonds since I requested >$1k in paper bonds. Treasury is trying to deplete their stock of paper bonds and I assume they didn't have anymore of the larger denominations. Unless they've re-stocked & you just want smaller denominations- I would just get the refund in cash and buy them via TD.

I've already converted some paper I-Bonds into TD bonds, and the process went fine, but I dread doing it with the stack of paper $50 bonds. I vaguely recall changing the beneficiary of the converted bonds was my main reason for making the conversion. Would have just cashed them, but they from the old days when the fixed rates were higher.
Using your tax refund is the only way to get paper I Bonds any more. Not to mention, it is a way to get an additional $5K in I Bonds beyond the $10K individual and trust limits.
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Re: Buying I-bonds with tax refund

Post by billthecat »

SlowMovingInvestor wrote: Tue Jun 30, 2020 1:50 pm
2) How cumbersome is the conversion process from paper I-bond to electronic ?
The treasurydirect site is picky but the process is actually easy, if you follow their directions. And fairly quick - I got an emailed acknowledgement that they received my paper bonds 1 week after mailing.
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AnEngineer
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Re: Buying I-bonds with tax refund

Post by AnEngineer »

samjuno wrote: Wed Jul 01, 2020 9:45 pm I had part of my tax refunded in paper I-Bonds(~2 yrs ago)- never again! I got so many $50 bonds since I requested >$1k in paper bonds. Treasury is trying to deplete their stock of paper bonds and I assume they didn't have anymore of the larger denominations. Unless they've re-stocked & you just want smaller denominations- I would just get the refund in cash and buy them via TD.

I've already converted some paper I-Bonds into TD bonds, and the process went fine, but I dread doing it with the stack of paper $50 bonds. I vaguely recall changing the beneficiary of the converted bonds was my main reason for making the conversion. Would have just cashed them, but they from the old days when the fixed rates were higher.
There's a specified formula of what denomination the I bonds come in. Depending on the amount, you'll get a mix of $50 up to $1000 I believe. At most only the last couple hundred or so would be in $50 bonds.
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Re: Buying I-bonds with tax refund

Post by 17outs »

I just did this for the first time this year, and I can share my experience.

I got my tax refund. About 2 weeks later received 5k in paper bonds with my and my spouses names on them. They were 10 bonds total. 4 1k and then smaller. I created the manifest and sent them in, and also created the Conversion space in my TD account. A week later I received an email saying they were received. 2 weeks later I checked my account and see them in the converted space so all went as I expected except for one thing.

My account is my name WITH my spouses name. The Converted space bonds showed with only my name and ssn. I went to change ownership of the bonds and it appears that I can only choose my name with my spouse as beneficiary, not the sort of joint account that is my normal primary account. It is a little annoying that they come as 10 bonds. Would be nice if they were just 5 1k bonds, but I understand why. Either way nice to be able to buy 15k this year!
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Re: Buying I-bonds with tax refund

Post by BrokerageZelda »

17outs wrote: Fri Jun 18, 2021 9:16 am I just did this for the first time this year, and I can share my experience.

I got my tax refund. About 2 weeks later received 5k in paper bonds with my and my spouses names on them. They were 10 bonds total. 4 1k and then smaller. I created the manifest and sent them in, and also created the Conversion space in my TD account. A week later I received an email saying they were received. 2 weeks later I checked my account and see them in the converted space so all went as I expected except for one thing.

My account is my name WITH my spouses name. The Converted space bonds showed with only my name and ssn. I went to change ownership of the bonds and it appears that I can only choose my name with my spouse as beneficiary, not the sort of joint account that is my normal primary account. It is a little annoying that they come as 10 bonds. Would be nice if they were just 5 1k bonds, but I understand why. Either way nice to be able to buy 15k this year!
The 'conversion' sub-account has more restrictions than your 'main' account, but the trick is that you can transfer your converted bonds out of your 'conversion' sub-account into your 'main' account and magically gain the ability to add a WITH, which you can't do in your 'conversion' account.

https://www.treasurydirect.gov/indiv/he ... m#transfer

It's considered a transfer from one TD account to another, but because the SSN on both accounts should be the same, no paper form should be required.

As a side note, if the paper bond that you sent in was registered A OR B, the new bond should have shown up that way in TD if you specified it that way when you created it on the manifest. Maybe you used an individual name registration instead of co-ownership when you created the manifest?
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Re: Buying I-bonds with tax refund

Post by jt90505 »

The downside is the hassle of dealing with all the small denomination paper bonds.
The upside is the ability to increase your annual purchase of i-bonds.
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Re: Buying I-bonds with tax refund

Post by tadamsmar »

Flobes wrote: Tue Jun 30, 2020 2:30 pm
SlowMovingInvestor wrote: Tue Jun 30, 2020 1:50 pm I'm about to file my Fed refund and expecting a refund. I was thinking of using the refund to buy I-bonds.

1) This is an MFJ return. I presume the I-bond will come back jointly owned ?

4) If your refund is (say) 4297, can you ask for the entire 4297 or only for I-Bond totals that can match a combination of issued denominations and get the rest as a direct deposit ?
You will file Form 8888. On it, you'll specify how you want your IBonds titled. And you'll detail how much of your refund you want to go to Ibonds, how much to direct deposit, how much to a paper check. Form 8888: Allocation of Refund (Including Savings Bond Purchases)
SlowMovingInvestor wrote: Tue Jun 30, 2020 1:50 pm ...? My refund is < $5000.
If you want the maximum of $5000 in IBonds, you can add $703 to your tax payments. Simplest is via IRS Direct Pay.
SlowMovingInvestor wrote: Tue Jun 30, 2020 1:50 pm 1) Will I be able to convert it to electronic form and have it deposited into the Treasury Direct account that I own individually ?

2) How cumbersome is the conversion process from paper I-bond to electronic ?
Here's Treasury Direct explanation: Convert Your Paper Savings Bonds Using SmartExchange

There are lots of threads here about this process. Type "Converting IBonds" into the Forum searchbox.

Timeframe is at best variable, and is likely very delayed due to current conditions.
It looks like Form 8888 has room for 2 different registrations. Can you get $10,000 in Ibonds for a MFJ tax filing?
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Flobes
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Re: Buying I-bonds with tax refund

Post by Flobes »

tadamsmar wrote: Wed Dec 22, 2021 1:59 pm It looks like Form 8888 has room for 2 different registrations. Can you get $10,000 in Ibonds for a MFJ tax filing?
It's limited to $5000 max per tax return.
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Re: Buying I-bonds with tax refund

Post by tadamsmar »

Flobes wrote: Wed Dec 22, 2021 2:28 pm
tadamsmar wrote: Wed Dec 22, 2021 1:59 pm It looks like Form 8888 has room for 2 different registrations. Can you get $10,000 in Ibonds for a MFJ tax filing?
It's limited to $5000 max per tax return.
Can you get two bonds, one for each spouse?
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Re: Buying I-bonds with tax refund

Post by Mel Lindauer »

jt90505 wrote: Fri Jun 18, 2021 3:55 pm The downside is the hassle of dealing with all the small denomination paper bonds.
The upside is the ability to increase your annual purchase of i-bonds.
Perhaps folks should think of hanging on to the smaller denomination I Bonds (or all of them) since they're like cash. Just go to bank and get them redeemed as needed, in case you get locked out of your TD account.
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Re: Buying I-bonds with tax refund

Post by Da5id »

Mel Lindauer wrote: Wed Dec 22, 2021 3:50 pm
jt90505 wrote: Fri Jun 18, 2021 3:55 pm The downside is the hassle of dealing with all the small denomination paper bonds.
The upside is the ability to increase your annual purchase of i-bonds.
Perhaps folks should think of hanging on to the smaller denomination I Bonds (or all of them) since they're like cash. Just go to bank and get them redeemed as needed, in case you get locked out of your TD account.
Worth considering, sure. Though my bank (Citizens) said they no longer cash treasury bonds, and others are perhaps the same. Banks that do cash bonds may only opt to do so for people with accounts. My son opened an account at a different bank just to get them to cash a bond of his that we had sitting in the basement.
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Re: Buying I-bonds with tax refund

Post by Mel Lindauer »

Da5id wrote: Wed Dec 22, 2021 3:55 pm
Mel Lindauer wrote: Wed Dec 22, 2021 3:50 pm
jt90505 wrote: Fri Jun 18, 2021 3:55 pm The downside is the hassle of dealing with all the small denomination paper bonds.
The upside is the ability to increase your annual purchase of i-bonds.
Perhaps folks should think of hanging on to the smaller denomination I Bonds (or all of them) since they're like cash. Just go to bank and get them redeemed as needed, in case you get locked out of your TD account.
Worth considering, sure. Though my bank (Citizens) said they no longer cash treasury bonds, and others are perhaps the same. Banks that do cash bonds may only opt to do so for people with accounts. My son opened an account at a different bank just to get them to cash a bond of his that we had sitting in the basement.
Yes, it's much easier to get the bonds cashed if you have an account at the bank, but some banks will still redeem up to $1000 for a non-customer.
Best Regards - Mel | | Semper Fi
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