Cashing In (Redeeming) Series I Savings Bonds - SavingsBonds.com
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Cashing In I Bonds

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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. Don't assume an older bond is worth more than a newer bond.

PLEASE BE ADVISED THAT THERE IS A THREE MONTH INTEREST PENALTY IF YOU CASH IN AN I BOND WITHIN THE FIRST FIVE YEARS.

REQUIREMENTS FOR REDEMPTION
Most financial Institutions will cash-in (redeem) your bonds.
The bond must be at least 12 months old.
You must be the owner, co-owner or entitled individual.
If you are the beneficiary, you must show proof that you are entitled to cash the bond and death certificate.
You can cash in a bond for your child - bring identification such as a birth certificate (see identification information below).
Your bonds may have to be sent to a Federal Reserve Bank which could delay getting cash.
You can no longer walk into a Federal Reserve Bank for service. Transactions are done via electronically or by mail. 

If your Bank or Financial Institution will not redeem your Bonds,
contact your Federal Reserve Bank

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 notifiying the primary owner (and the primary owner can cash in a bond without informing the co-owner).

Tip From SavingsBonds.com Inc.: 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 (check your local bank listings) and they will pay you for your bonds, with limitations. You must present valid identification (example: driver's license, valid passport) and you will only be permitted to redeem up to $1,000 worth of bonds at one time.

Tip from SavingsBonds.com Inc.: 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.com Inc.: 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 as 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 three other scenarios in which double taxation may occur:

The primary bond owner may have 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 may have 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 Inc.: 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 could 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 decedent's tax return or taxed as part of the estate.  



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