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
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
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
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
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.