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Do you know what interest rate your bonds
are paying? If you are thinking about cashing in and re-investing, be certain that you
know the current and lifetime interest rates they are paying. Also be aware
of the next interest posting date - you don't want to forfeit up to six
months worth of interest. Don't assume an older bond
is worth more than a newer bond.
Requirements for Redemption
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Most financial Institutions will cash-in (redeem) your bonds. |
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The bond must be at least 12 months old. |
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You must be the owner, co-owner or entitled individual |
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If you are the beneficiary, you must show proof that you are entitled
to cash the bond (bring a death certificate). |
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You can cash in a bond for your child - bring identification such as
a birth certificate (see identification info below) |
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Your bonds may have to be sent to a Federal Reserve Bank which could
delay getting cash. |
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Note: you can no longer walk into a Federal Reserve Bank for service.
Transactions are done electronically or by mail. |
If your Bank or Financial
Institution will not redeem your Bonds,
contact your Federal Reserve Bank
Forfeiture of Interest -
If you cash-in bonds purchased in May
1997 or after, you will forfeit three months worth of interest if the bond
is cashed in within the first five years.
PRIMARY AND CO-OWNER CASHING IN
THE PRIMARY OWNER AND CO-OWNER LISTED ON A BOND HAVE EQUAL RIGHTS. A
CO-OWNER CAN CASH IN A BOND WITHOUT NOTIFYING THE PRIMARY OWNER (and a
primary can cash in without informing the co-owner).
Tip From SavingsBonds.com: Be careful
who you list as your co-owner on your bonds and always keep them in a safe, secure
location (see registration information).
Identifying yourself to the Financial Institution
If you don't have an existing "active" account with a bank
or financial institution, you can go to any "paying agent" or financial institution
that handles U.S. savings bonds (check
your local bank listings) They will redeem your bonds, with limitations. You must
present valid identification (example: drivers license, valid passport) and you
may only
be permitted to redeem up to $1,000 worth of bonds at one time.
Tip From SavingsBonds.com: To avoid
frustration, always contact your financial institution FIRST before attempting to cash in
your bonds. Find out what documents and identification they require. Try to set up an
appointment. Don't assume that you will get your cash right away. Bank/Financial
Institutions may be busy at the time, and not able to process your transactions right
away. They may ask you to leave your bonds and come back at another time.
RECEIPT OF 1099-INT FORMS
When you cash in a bond (or savings notes), the bank or financial
institution will issue an IRS form 1099-INT on the interest earned. This information is
also reported to the IRS. The 1099-INT form may be issued either at the time you cashed in
the bond, or it may be mailed to you right after the year end in which you cashed the
bond.
Tip From SavingsBonds.coms: Make certain you
keep your 1099-INT form with your taxes. You don't want to be penalized by not reporting
the interest earned. The interest earned is considered income by the government.
BE CAREFUL OF DOUBLE TAXATION
When a bond is cashed in, a 1099-INT form is issued by the bank or
financial institution to the person who is cashing in the bond. PLEASE BE ADVISED: IF YOU
ELECTED TO REPORT THE INTEREST INCOME EACH YEAR, WHEN YOU CASH IN THE BOND, THE 1099-INT
WILL NOT BE REDUCED BY THE TOTAL AMOUNT OF INCOME YOU REPORTED IN THE PRIOR YEARS.
Below are scenarios in which double taxation may occur:
The primary bond owner may had been reporting the interest income
every year, and you are the co-owner. When you cash in the bond, a 1099 will be issued for
the total amount of the interest income (the difference of the purchase price of the bond,
and the cash in amount), even though the primary owner had been reporting the interest
income for years.
If you received a bond from a decedent, and the decedent had
reported the interest income every year-prior to his or her death-the 1099 you receive
will not be reduced by the income reported by the decedent.
Tip from SavingsBonds.com: If
you know you are a co-owner or a beneficiary on savings bonds, be certain to discuss any
income reporting that may be taking place on the bonds that may come your way. Keep a
detailed list and copies of the 1040 Federal Tax returns (and schedule B) that the person
may have included as income. You may also be entitled to a federal tax refund if the
interest income had been reported & taxed in the decedents tax return or taxed as part
of the estate. |
