I Bonds are the best bonds you can buy at the moment if only you can buy more of them.
Maximum $5,000 Per Tax Return
In addition to buying I Bonds on the government website TreasuryDirect (see How to Buy I Bonds), you can buy another $5,000 per year indirectly, but only if you’re due at least that much in tax refund and you tell the IRS to use part of your tax refund to buy I Bonds. You can’t send a check with your tax return and ask them to buy I Bonds for you.
The $5,000 maximum is per tax return, not per person. If you’re married filing jointly, you still can buy only a maximum of $5,000 for both of you combined, not $5,000 for each of you. If you’re married filing separately, each of you can buy a maximum of $5,000, but of course you should make sure you won’t lose other tax benefits when you choose to file separately. From IRS Form 8888 instructions on page 3:
You may request up to three different savings bond registrations. However, each
registration must be a multiple of $50, and the total of lines 4, 5a, and 6a can’t be more than $5,000 (or your refund amount, whichever is smaller).
Because the amount you can purchase is also capped to the amount of your tax refund, if you normally don’t have a tax refund that large, you can increase your tax refund by overpaying ahead of time. Since I’m self-employed and I pay quarterly estimated taxes, I just pay extra for the fourth quarter.
Pay with Automatic Extension
If you don’t pay quarterly estimated taxes, you can make a one-time payment through IRS Direct Pay. After a year is over, you can still pay toward the previous year’s taxes with an automatic extension. When you say your payment is for an extension, the payment automatically files the extension. You don’t need to fill out another form.
You get extra time with an extension but you don’t have to use it. You can still file your tax return on time before April 15. Choose “Extension” as the reason for payment. Select “4868” in the “Apply Payment To” field, and choose the previous year for the tax period for payment.
The “Extension” option will become available after the IRS opens up the tax season for the previous year, usually around the end of January. If it isn’t available yet, just wait.
When you pay extra, don’t make your refund exactly $5,000. Make it a small odd amount above $5,000 so that you’ll still have a small refund after buying I Bonds. For example, if you’re expecting a refund of $2,136, pay $3,000 with your automatic extension. Now your expected refund is $5,136. When you see $136 deposited to your bank account, you’ll know the other $5,000 is sent to buy I Bonds.
Pay in Whole Dollars
Also make sure you pay in whole dollars, not dollars and cents. If you make estimated tax payments, also make sure those are in whole dollars. If you already made estimated tax payments with dollars and cents, make another payment to make your total estimated tax and extension payments add up to whole dollars.
Cents in your total estimated tax and extension payments will cause the IRS to adjust your refund, resulting in not issuing I Bonds to you. This doesn’t apply to tax withholdings. Your tax withholdings from your income can have dollars and cents.
Wait
Wait at least a week after you make the extension payment before you file your tax return. This gives some time for your payment to be reflected in your account at the IRS. While this may not be strictly necessary, giving the computer systems a little more time to sync up can’t hurt.
Report Payment on Your Tax Return
After you pay extra with an automatic extension, make sure to account for it on your tax return. Here’s how to do it in TurboTax and H&R Block downloaded tax software.
Online tax software doesn’t have all the features of downloaded tax software, and it’s often more expensive. See Tax Software: Buy the Download, Not the Online Service.
TurboTax
In TurboTax (downloaded software), it’s under Federal Taxes, Deductions & Credits, Estimates and Other Taxes Paid, Other Income Taxes.
Then choose payment with the federal extension for the previous year.
H&R Block Software
It works similarly in H&R Block downloaded tax software. The payment with extension is under Federal, Taxes, Federal Tax Payments.
Check the box for “Amount paid with a 20xx extension.”
Split Refund for I Bonds
When it comes to asking for I Bonds, it’s in the final steps before filing your return. Here’s how to do it in TurboTax and H&R Block downloaded tax software.
Online tax software doesn’t have all the features of downloaded tax software, and it’s often more expensive. See Tax Software: Buy the Download, Not the Online Service.
TurboTax
When TurboTax (downloaded software) asks you whether you’d like to receive your refund by direct deposit or by check, choose direct deposit.
You check a box at the bottom to say you want to split your tax refund and use part of it to buy I Bonds.
Then choose to buy I Bonds and direct deposit the leftover refund.
Then you will say how much you’d like to buy and whose name(s) should be on the bonds.
You can split the I Bonds purchase into an amount for yourself plus up to two free-form named recipients. Each owner must receive a multiple of $50 and the total for all three can’t exceed $5,000.
If you put an amount in the first box, you don’t have to give any name. They will automatically copy the name(s) from your tax return. If you’re filing jointly, the bonds will be issued in both of your names as co-owners.
If you’d like to have the bond issued in only one name (yours or someone else’s), put an amount as the Second Savings Bond Purchase. Give the name (and a co-owner or beneficiary if desired). Check the small box if the second name is a beneficiary (not a co-owner) of the owner for this purchase. Repeat for the Third Savings Bond Purchase if you’re buying for another recipient.
H&R Block
H&R Block downloaded tax software has it in the final steps before filing the return. When it asks you whether you want a direct deposit or a check, choose direct deposit. Reduce the amount of your direct deposit by the amount of I Bonds you’d like to buy.
Now, find and open Form 8888:
1. Click Forms at the top of the program.
2. Select the Show All Forms option.
3. Scroll down to find Form 8888.
4. Select and open Form 8888 and fill it out to allocate amounts to savings bonds purchases.
You enter the amount you’d like to buy and the names that should appear on the bonds in Form 8888.
You can split the I Bonds purchase into an amount for yourself plus up to two free-form named recipients. Each owner must receive a multiple of $50 and the total for all three can’t exceed $5,000.
If you put an amount on Line 4, you don’t have to give any name. They will automatically copy the name(s) from your tax return. If you’re filing jointly, the bonds will be issued in both of your names as co-owners.
If you’d like to have the bond issued in only one name (yours or someone else’s), put an amount on Line 5a. Give the name on Line 5b (and a co-owner or beneficiary on Line 5c if desired). Check the small box if the name on Line 5c is a beneficiary (not a co-owner) of the recipient on Line 5b. Repeat for Line 6a, 6b, and 6c if you’re buying for another recipient.
12 Envelopes
After you file your tax return, if everything goes well, the I Bonds will come by mail in multiple denominations. They will issue the first $250 in $50 bonds, and the remaining amount in the fewest number of bonds. As a result, if you buy the full $5,000, you will receive:
- $1,000 bond x 4
- $500 bond x 1
- $200 bond x 1
- $50 bond x 6
That’s a total of 12 bonds. Each bond will come in a separate envelope. Because the bonds have your name and address printed on them, it’s just easier for them to put each one into a separate window envelope. Collating multiple bonds into the same envelope increases the risk of a mix-up. So expect 12 individual envelopes to come in the mail when you buy the full $5,000.
Sometimes the bonds don’t come in one batch. If you receive fewer bonds than you’re expecting, just wait. Most likely additional bonds will show up in the mail in a few days. If they don’t come in two weeks after you receive the first batch, call TreasuryDirect customer service at 844-284-2676.
Some readers reported receiving a single $5,000 bond. That makes it easier to deposit into your online account.
Deposit Paper I Bonds to Online Account
You can keep these bonds in paper form if you’d like. Put them in a safe deposit box. When you’d like to cash out, you can take them to your bank or credit union or a major national bank such as Bank of America or Chase. They will look up the current values in their system and deposit the money into your account or give you cash.
I prefer to consolidate the paper bonds with the bonds in my TreasuryDirect online account because it’s more secure and more convenient to have all the bonds in one place. You can mail the paper bonds to the Treasury Department and deposit them into your account. Please read How To Deposit Paper I Bonds to TreasuryDirect Online Account.
If only they ask for your TreasuryDirect account number on the tax return, they won’t have to mail you the bonds and you won’t have to mail them back in. While it is possible to direct deposit part of your tax refund into your TreasuryDirect account using a special routing number, when you use the money to buy I Bonds, you use up part of your $10,000/year quota, which defeats the whole purpose of overpaying taxes to buy additional I Bonds. The government has no incentive to make it easy. If you want more I Bonds, you’ll have to tolerate their process.
When Something Goes Wrong
Sometimes instead of receiving I bonds, you get 100% of your tax refund deposited into your bank account. It’s not clear why this happens to some people.
You can’t do anything about it. Once you receive your tax refund, it’s not possible to have the IRS take it back and buy I Bonds for you. Try your luck again next year. It may help if you make your tax refund not exactly $5,000. Make it say $5,081 and ask for $5,000 in I Bonds and $81 as a direct deposit to your bank account.
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Dan A says
Thanks for the detailed explanation!! I remember trying out T-bills after your article (almost) 2 years ago, before the rates dropped. Now that it seems inevitable that we’re going into a Japan-like economy, staying slightly ahead of inflation doesn’t sound so bad.
If my TreasuryDirect acct is setup for a Living Trust, can the I bonds be in my name (as they most likely will be from the IRS), or do they have to in my name as trustee?
Harry Sit says
I don’t have a trust account there. It looks to me that an individual account and a trust account are separate, and all the bonds you buy in the trust account belong to the trust. If you want bonds in your name you’d have to open a separate account as an individual. You can have the bonds in your individual account “reissued” to the trust.
Dan A says
I guess the best option is to use line 5 on Form 8888 to specify myself with a trustee designation, rather than using line 4. They make it so confusing.
Haseung says
Harry,
After reading your article, I purchased $5,000 as I was filing the tax. Yesterday, I received the I-bonds in the mail like you mentioned. However, I only received 5 of the $50, so total $4,950. Is there anything I could do in this case?
Thank you for your help!
Harry Sit says
Haseung – Sometimes the paper bonds come in separate envelopes. Wait a week and see if the missing bond will show up in the mail. See comments #13 and #14 below.
LK says
I use TaxAct to file. Do you have screenshots on how to do this in TaxAct?
Harry Sit says
Sorry, I don’t have TaxACT.
DB says
Great post Harry. Thank you for answering all the questions I had on this topic.
Ames says
Thank you for another timely post, Harry! I just increased my estimated payment to allow for this option. It will be my first time doing this and I will follow your helpful steps when filing.
H says
Thanks Mr. Sit! I just purchased $10k of I Bonds after reading your post and doing some research.
I’d like to ask if I am to make a one-time payment on IRS for tax year 2020, the tax refund that I plan to use to buy another $5k of I Bonds, will that be considered 2020 or 2021?
Harry Sit says
They will be 2021 bonds. Say the IRS processes your tax return in April and sends $5k from your tax refund to the savings bond department. If it’s still before the end of April when they process your bond order, you’ll get April 2021 bonds. If it’s already May, you’ll get May 2021 bonds.
DB says
EThe I-bonds you purchase with your 2020 tax refund will be considered a 2021 purchase. If you file in April 2021, your issue date could be April 1st or May 1st, depending on when IRS processes your return and Treasury Direct issues your refund in the form of I-bonds.
H says
Thanks Harry and DB!
MDF says
Howdy Harry. Thank you for the nice article. We are in our 60s. For the bond side of our portfolio we have Vanguard’s Total Bond Market Index Fund in a Roth IRA. Would think it wise to redeem some of those shares and buy I-Bonds?
Happy trails, MDF
Harry Sit says
Because you can’t buy I Bonds inside a Roth IRA, if you must take money out of the Roth IRA to buy it, it’s probably not worth it. Earnings in a Roth IRA are tax-free. Interest on I Bonds is taxable when you redeem the bonds.
Steve says
If you are filing a joint tax return, the description for Form 8888 line 4 says “(and your spouse, if filing jointly)”. Are these just bonds issues with both spouses as co-owners? Can they then be converted into electronic bonds in either spouse’s TreasuryDirect account?
Harry Sit says
Yes. The bonds will have both spouses as co-owners and they can be converted into either owner’s account.
“If you’re a TreasuryDirect account owner, you can exchange paper savings bonds on which you are the sole owner, a co-owner, or the owner with a beneficiary.”
https://www.treasurydirect.gov/indiv/research/indepth/smartexchangeinfo.htm
EV says
Great post. I had planned to do this before reading your post. We had about $3500 coming back to us this year so I want to add another $1500 to get up to $5000. But I have a very old school question, in case you have the answer.
I plan to file my tax return via paper mail. I was hoping to include that extra $1500 payment with my return as a paper check, having already accounted for that in my 2020 estimated tax payment number on line 26 of form 1040.
Would that be an acceptable approach? I was hoping to be able to determine they had received my paper return once I saw that my check had been cashed. Your opinion on this approach would be appreciated.
Steve says
I’m pretty sure the IRS will only accept a check with an appropriate form, either 4868, a 1040 with taxes due, a quarterly estimated tax form, or similar.
Harry Sit says
EV – I agree with Steve. That doesn’t work. A check that accompanies the 1040 isn’t an estimated tax payment. If you’d like to confirm that your paper return is received, you can mail it certified and track the delivery through USPS. To increase your refund, IRS Direct Pay with automatic 4868 extension is still the easiest way.
EV says
Well, I’m very glad I asked. Thanks Steve and Harry for the quick feedback, and I’ll use that suggested approach. Appreciate it!
Michele says
Thanks for all the great information!
If filing married jointly, is the limit $5000 per individual or total for both?
stannius says
Total for both.
R says
Are you sure? The irs website says $5000 per ssn…
Harry Sit says
It doesn’t say $5000 per SSN. From IRS Form 8888 instructions on page 3:
“You may request up to three different savings bond registrations. However, each
registration must be a multiple of $50, and the total of lines 4, 5a, and 6a can’t be
more than $5,000 (or your refund amount, whichever is smaller).”
Steve says
I just got my paper bonds. Instead of two $100 bonds I got one $200 bond.
Rob says
I made sure to overpay taxes and asked for $5000 in bonds on my Turbotax return. Received a single $500 bond in the mail today. An error? Should I wait to see if the rest arrives separately? I don’t even know whom to contact to fix it.
Steven Crisp says
I’d say wait a while. For some reason, they send the bonds separately. Last year I received all but one on a given day, and then 3 or 4 days later, the last one showed up.
Hopefully the reverse for you will occur.
Rob says
Yep, I got some more the next day, and the final $1000 showed up another two days later. Such a silly system…
DB says
Has anyone tried making extra tax payment with extension using a credit card similar to Direct Pay to get paper I-bonds? The table at https://www.irs.gov/payments/frequency-limit-table-by-type-of-tax-payment seems to indicate this can only be done until April 15th, but https://www.irs.gov/newsroom/tax-day-for-individuals-extended-to-may-17-treasury-irs-extend-filing-and-payment-deadline appears to extend that deadline to 5/17/21.
Harry Sit says
The IRS accepts payments with an automatic extension through May 17. The deadline is the same whether you pay by card, Direct Pay, or EFTPS.
Abe says
Is the extension automatic if you use a credit/debit card?
Harry Sit says
Abe – Based on reports from Mike (comments #70-75), if you choose the correct extension payment type, you fill out an electronic equivalent of the Form 4868 when you pay with a credit/debit card via an approved payment processor. You end up with an extension after you make the payment. Mike had problems with some providers but maybe other providers will work OK.
DD says
If I already filed my 2020 return several months ago and it was accepted, am I out of
luck on following the recipe in this article for the 2020 tax year?
How would the recipe be modified to fit this case? Would an amended
return be of use?
Harry Sit says
Too late for the 2020 tax year but there’s always next year. This only gets you the extra $5,000. The regular $10,000 per person through the TreasuryDirect website is still open.
David Galyardt says
Harry,
Many thanks for all of your knowledge sharing! I followed the process you suggested above and received the bonds for my wife and I as you described. My question is in the process of consolidating these into my Treasury Direct account. In your experience is there any issue in sending $2500 worth of bonds in a single USPS mail to the Treasury? I was thinking of doing it in smaller chunks to make the headache of lost/stolen mail less impactful. Also, in your experience, how long does it take before your account gets credited?
Many thanks for all your help!
Dave
Harry Sit says
I don’t have any issue with sending all the bonds and the manifest in one envelope. The paper bonds are replaceable when you have the serial numbers (take pictures before sending). If you’d like to test the process by sending only the small denominations first, that’s certainly OK.
I haven’t received my bonds from this year’s refund yet. As I remember from previous submissions, it took a few weeks. Because the issue date won’t change, you still get the same amount of interest. Since you can’t redeem in the first year anyway, it doesn’t matter how long they take to complete the process after they acknowledge the receipt.
Marlene says
I haven’t received my bonds in mail (for 2020 refund) yet either, so thank you for posting.
Steven Crisp says
Question — For tax year 2020 I overpaid by exactly $5000, and requested iBonds be sent to me. Instead I received a $5000 direct deposit. Any idea what I might have done wrong? Anyway you can think of to somehow correct this issue for 2020 or has that ship sailed?
– Note 1: we already purchased $10K iBonds directly for my wife and me last year, and plan to do that again this year, so that’s not a way to make up for this apparent error on the part of the IRS.
– Note 2: I have received iBonds back via mail from IRS in previous years, which is why I’m so surprised it did not work this time.
I welcome your feedback, and assistance with anything I may have done incorrectly.
Harry Sit says
There isn’t anything you can do now. Sometimes it just happens for no good reason. I suggest you make your refund not exactly $5,000 next time. Make it say $5,081 and ask for $5,000 in I Bonds and $81 in direct deposit. Maybe it will help.
Steven F. Crisp says
Thanks very much for the suggestion, Harry. I’ll try it this year. Wishing you the best.
Chris says
Rather than relying on paper bonds delivered by mail, the instructions for the IRS Form 8888 say that you can buy the bonds electronically. Paper bonds are only if you don’t have a TreasuryDirect account.
From the General Instructions for Form 8888:
“U.S. Series I Savings Bonds
You can request that your refund (or part of it) be used to buy up to $5,000 in series I savings bonds. You can buy them electronically by direct deposit into your TreasuryDirect® account. See instructions under Part I for details. Or, if you don’t have a TreasuryDirect® account, you can buy paper savings bonds. See the instructions under Part II for details.”
Harry Sit says
When you use the direct deposit to the TreasuryDirect account to buy I Bonds, you use up part of your $10,000 quota for the year. You get the extra $5,000 on top of your $10,000 per year only when you ask for paper bonds.
Steven F. Crisp says
Thanks Chris … I had already purchased my 2x $10,000 iBonds from Treasury Direct for 2020. Hence my desire to get the paper iBonds through the IRS.
Kelly says
If I want to file an extention for 2021 the option will be made available in 2022?
Harry Sit says
Yes, but not necessarily January 1. Maybe after the IRS opens the filing season to accept returns for the previous year, which usually happens in late January or early February.
Marlene Lodge says
The IRS made a mistake on mine even after I submitted a paper return as requested. I just received a check around October 15 for my 4,557 refund instead of the paper ibonds (included $50 interest); what a disappointment after waiting five months and having to submit paper
Richard Brown says
If I’m not sure what my 2021 tax return will be can I just overpay sending in $5000 in order to get that much in bonds with my return? Thanks.
Harry Sit says
Your tax return has to show enough refund to cover the bonds you request. If your tax return only shows a $1,000 refund, you can’t attach a check for $5,000 and ask for $5,000 in I Bonds in addition to your $1,000 refund.
Steve says
You can send in a payment with a request for extension. I have done this two or three times, once for ibonds and one or more times to get my refund in the form of amazon gift cards with a bonus % added. The IRS hasn’t rejected my overpayment, at least not yet. I have usually sent in the extension request in January and then filed my taxes in February.
Just because you send in a $5k check doesn’t mean you will get to get $5k in ibonds. If you would have owed taxes (if not for the extra payment) then you’d get less than $5k, and if you would have gotten a refund then you will still get $5k ibonds but you’ll also get a monetary refund. So it helps to actually do an estimate or dry run of your taxes and then add $5k to that.
Danny says
My 2021 taxes were filed in April and I got a $3,451 refund which was already direct deposited into my checking account. Did I miss my opportunity to buy I Savings bonds using my $3,450 tax return? Using ones tax return anytime during the calendar year to buy savings bonds (up to 5k) seems within the spirit of the rule but I didn’t know if there was a technicality preventing me from doing this.
Harry Sit says
Too late now. You had to ask for I Bonds when you filed your tax return. Follow the steps here next year.
Mark says
Harry,
If the bonds mailed to me get lost in the mail, I assume there is a somewhat painful process available for getting them reissued? This appears to be the form to do it https://www.treasurydirect.gov/forms/sav1048.pdf
If that’s right, then I guess there isn’t a big risk that my refund in I bonds will disappear?
Harry Sit says
I haven’t heard any story of bonds lost in the mail. A delay of some bonds not showing up in the mail on the same day with other bonds happens sometimes, but bonds lost in the mail forever must be very rare. If it happens to you, contact TreasuryDirect customer service. I assume they know the serial numbers and they can cancel the lost bonds and send replacements. That 1048 Form is for bonds you already received and then lost. I used it to have my bonds replaced after burglars stole my paper bonds in a break-in. See Replace Lost Or Stolen Savings Bonds: A Real Life Experience.
Kelly says
Instead of filing an extention do you see any problem just having my employer take out extra withholdings from my paycheck? My employer allows me to make such a change and I could split the $5k over the remaining paychecks I have for this year.
Harry Sit says
That also works. You’ll pay sooner than filing an extension and your tax situation is less clear before the end of the year. It still works if you prefer to do it that way.
Steven H says
I currently will be due a small refund in 2022. I would like to overpay by more than $5,000 and use the refund to buy $5000 in paper I bonds. If possible I would like to make the overpayment in August.
Is this possible if I timely file for an extension without at that time making a payment, then make the overpayment electronically in August and file the return before the extended deadline? Or do I need to make the overpayment by the original deadline of April 15 (or as adjusted due to the pandemic)?
Thanks.
Harry Sit says
The extension has to be filed by the regular filing due date. The payment has to go together with the extension. The last day to pay is April 15 in most years.
Steve Starks says
I do not see extension as an option on the IRS Direct Pay website, is that because it’s not at the end of the year yet? So would I select estimated tax?
Harry Sit says
If you must pay now, select estimated tax. Or you can wait until the IRS opens the next tax season usually at the end of January.
bws92082 says
Hi. The tax software I use doesn’t allow bond purchases on refunds. So would I just print out the tax return on paper (instead of submitting electronically) and mail it in with some sort of additional special manual form indicating I want bonds?
Thx,
Bws92082
Harry Sit says
You can fill out Form 8888 and attach it manually but you also need to make sure your 1040 doesn’t have your direct deposit information already filled in on lines 35a – 35d. Mark the box on Line 35a to indicate you’re attaching Form 8888. The direct deposit information goes on Form 8888. However, a paper return takes a long time to get processed by the IRS. It may cause you to miss the April 30 deadline to get the 7.12% rate on I Bonds for six months. I think you’re better off switching to a different tax software that supports bond purchases with e-file.
bws92082 says
Thx. The only thing I would be concerned about in changing my (free) tax software is that the cost of the new software could take most of the interest gain I would get over the first 6 months of the bond. Is there any cheap tax software you would recommend? Thx.
Harry Sit says
The two software shown in this post aren’t that expensive when you know how to get them. TurboTax Deluxe + State is rumored to go on sale on 12/29 at Amazon for net $30 after a $10 Amazon gift card (net $20 if you don’t need state). H&R Block Deluxe + State is $20 ($10 if you don’t need state) when you follow these instructions from slickdeals.
bws92082 says
One more question…
The TreasuryDirect website says Series I interest payments accrue beginning on the first day of the month after you buy the bond. So if the 1st of the month falls on a weekend and the purchase date falls on, say, the 2nd of the month, does interest not begin to accuse until the beginning of the following month?
Harry Sit says
It goes backwards. The first day of the month in which you buy.
Chris says
If the 8888 form is not part of your tax software, you could just transfer all of your tax information to the IRS Free File Fillable Forms at https://www.irs.gov/e-file-providers/free-file-fillable-forms. This system (available later next month for 2021 tax filing) will allow electronic submission of your taxes. Follow the directions on the 8888 instructions carefully.
Marlene Lodge says
– No state tax return option is available.
– Free File Fillable Forms is the only IRS Free File option available for taxpayers whose 2021 income (AGI) is greater than $73,000.
bws92082 says
OK, I submitted by estimated tax payment ($4,500) thru IRS Direct Pay. If I run into any complications, I’ll add a follow-up post here.
Thx everyone.
Kyle says
Bless you sir for a fabulous article!!!
Alex says
Don’t see I-bond option in freetaxusa :((
bws92082 says
I used FreeTaxUSA and they don’t have I-Bond option available—I confirmed this with the Customer Support team. I requested that they add this feature next year and they said they would consider it.
Harry Sit says
H&R Block Deluxe software at $20 with state ($10 without) isn’t that much more expensive than FreeTaxUSA. The instructions in comment #31 still work for me even though the deal site says it expired.
Domenick says
Damn, was hoping FreeTaxUSA offered this for 2022.
Alex says
What is the difference if I overpay my tax via Form 1040 Series vs Form 4868 Automatic Extension of Time to File?
Harry Sit says
The last estimated tax payment counting toward the previous year is due on January 15. You can pay as late as April when you file a 4868 automatic extension. If you’re paying before January 15, the 1040-ES also works. It needs to be accounted for in the tax software a little differently than this post showed.
bws92082 says
Yes, Harry, I just purchase HR Block Fed-only for $10 (and I see form 8888 with I-Bond purchase option exists). Thx!!
Alex says
Thanks Harry.
I will use “4868 automatic extension” then. I am planning to open new credit card with spending bonus and pay with it. I hope it will work. Bank of America Business Cash Rewards has $500 Signup Bonus for 5k spending (http://bankofamerica.com/sbcashrewards500).
Steven H says
I recently bought the TurboTax Deluxe Federal + State download from Amazon for $40; it’s still at that price. State filing is another $20.
Alex says
One more question. If I overpay taxes with “4868 automatic extension” will software (HR Block, TurboTax, etc.) include it to my expected refund automatically, or should I add it manually in some field?
Harry Sit says
Software won’t know you paid extra unless you tell it. This post shows how.
Alex says
Harry,
I read the post but it is still not clear for me. So let’s assume I overpaid taxes with form 4868. For example $5000. Now I am starting to file a tax return with TurboTax. Should I use form 4868 in TurboTax (put $5000 in field 5 of this form) so TurboTax will correctly show my tax refund?
Harry Sit says
No, that’s not the right place. In TurboTax software, you click on Federal Taxes on the top, and then Deductions & Credits in the next level of menus. Next you scroll through the topics to find the “Estimates and Other Taxes Paid” heading and “Other Income Taxes” under it, as the screenshot shows. Use the Start button next to the topic.
Alex says
Thanks, but I am not sure if you get my question. Actually I found that on 1040 Schedule 3 Line 10 says “Amount paid with request for extension to file (see instructions)”.
If you go to instructions for 1040 here is the instruction for line 10:
“If you got an automatic extension of time to file Form 1040, 1040-SR, or 1040-NR by filing Form 4868 or by making a payment, enter the amount of the payment or any amount you paid with Form 4868. If you paid by debit or credit card, don’t include on line 10 the convenience fee you were charged. Also, include any amounts paid with Form 2350.”
So it looks like I need to add paid amount with Extension 4868 on Schedule 3 Line 10. After that tax software should show expected return correctly.
bws92082 says
Regarding the 8888 form lines 4 and 5a, why are they asking the same question twice? Am I supposed to duplicate my answer (I’m single and “yourself” applies to both lines)?
Harry Sit says
You only need to fill in line 4 if you buy just for yourself. Lines 5a and 6a are provided as free-form entries for buying for someone else or yourself with a co-owner, yourself with a beneficiary, etc. You can split the $5,000 up to three ways if you’d like.
kurph says
Hi thanks for the write-up!
Is it possible to do estimated quarterly tax now with credit card (by 1/15)(I have already did once on Sept 24 2021). And then pay extra (using extension) on end of Jan? Because I usually ended up owed tax on the return, so wondering if I could do both to achieve 5k over (minus what’s owed).
Thanks again!
Harry Sit says
It doesn’t matter how you pay the taxes (withholding, estimated taxes, payment with extension). As long as you have a refund in the end, you can use up to $5,000 of it to buy I Bonds.
Estimated taxes are accounted for in the tax software slightly differently than the screenshots showed here in this post. Just find the right place to report them when you do your taxes.
Mighty Investor says
This was super handy. Thanks!
Lynn says
Thank you so much for your article! I have a question. When I register on treasurydirect do I and my husband both need an account to max the $10,000 each? How about two kids? Can each of us add them as minor’s account?
Harry Sit says
Each adult needs a separate account. If both parents open an account for the same kid, the kid still has the same total limit in two accounts combined.
Jon Wilson says
Thank you for the detailed instructions. I’m an early retiree with no earned income and have $0 withholding and a $0 tax bill for 2021 (I still need to file due to investment income and a small roth conversion). Do you see any issues with me using your instructions and sending in the $5000 with Direct Pay in order for me to get my extra paper bonds this year?
Harry Sit says
No issues.
Jeff says
Thanks so much for this outstanding article! This works when filing form 1040 for one’s individual taxes, but is it also possible to purchase $5000 in I-Bonds if there is a >$5000 over payment when filing form 1041 (tax return for a trust)? Or is this option only available when filing form 1040?
Harry Sit says
The tax refund option is only for individuals. A trust can open an online account and buy $10,000. See Buy More I Bonds in a Revocable Living Trust, which applies to an irrevocable trust as well.
Dave H in Yuma, AZ says
Many thanks for the detailed explanation. I just did a dry run through the whole process of overpaying by $5K, and specifying the bond purchase using TurboTax 2021. The only think different from the instructions is that on the page “How do you want your $xxx Refund” there is no box that says “split it.” To get to that screen, you have to choose the option “Direct Deposit to a New Bank Account.” Then, a new screen appears that asks for the new account info, and it has a “split it” box.
Trevor H. says
Thanks much for the great article! Quick question: my spouse and I are filing jointly for 2020. Can we have the bond issued to one of us instead of both, i.e., can we just put my or my spouse’s name on the owner’s line or the bond automatically gets issued to both of us because we’re filing a joint return? Also, what’s the difference between line 4 or 5a on form 8888? They seem to say the same thing.
Harry Sit says
If you’d like to have the bonds in only one name, put the amount in line 5a and give the name. If you use line 4 they don’t ask for any name — they just automatically copy the name(s) from the tax return.
Ryan says
My accountant thinks that I can get 5k per social security number on my return (including kids). Can you double check and opine on this?
Harry Sit says
See the reply to comment #11 with a link to the IRS instructions.
Old mariner says
The IRS website specifically states: “This calendar year, you can buy up to a total of $5,000 in paper series I savings bonds with your refund.” That’s $5,000 maximum per refund (not per SSN or per person or per entity).
Source: https://www.irs.gov/refunds/using-your-income-tax-refund-to-save-by-buying-us-savings-bonds
Old mariner says
To Harry Sit: Thank you so much for this informative, well-written, well-organized, and detailed article as well as your answers to all the questions. I read it all. Really excellent. I followed the path you laid out in the article and used Direct Pay (1st time user) to top up my tax payment so I’d have enough refund for the whole $5,000. I’ve already maxxed out on electronic I-bonds for 2022.
Ryan says
Check this out:
https://www.treasurydirect.gov/indiv/research/faq/annualpurchaselimitchangeqa.htm#:~:text=The%20limit%20is%20applied%20per,limit%20is%20%245%2C000%20per%20SSN.
“The limit is applied per Social Security Number (SSN) or Taxpayer Identification Number (TIN). For paper Series I Savings Bonds purchased through IRS tax refunds, the purchase limit is $5,000 per SSN.”
Harry Sit says
If you’d like to test it, go ahead and ask for more than $5,000 with your tax return. Be forewarned you’ll receive no I Bonds that way.
Old mariner says
That’s an interesting article. It was dated Jan. 3, 2012. I don’t know if that’s how the $5,000 limit was interpreted by the Treasury Department back then or even now, but that’s not the way it is interpreted by the IRS currently.
IRS form 8888 (Rev. November 2021) , page 3, Part II states:
“You may request up to three different savings bond registrations. However, each registration must be a multiple of $50, and the total of lines 4, 5a, and 6a can’t be more than $5,000 (or your refund amount, whichever is smaller).”
Old mariner says
It took me a while, but I finally figured out what the above-referenced Treasury Direct article is trying to say. And even though it was written in 2012, the article is still technically correct in 2022.
It’s stating the truth that for paper I-bonds purchased through IRS tax refunds, there is a purchase limit of $5,000 per SSN (per year). What that comprises is bonds you buy for yourself through your own tax refund and bonds somebody else purchases for you through their tax refund. The total of those two purchases cannot exceed $5,000 per the SSN of the bondholder (per year). The article would be clearer if it stated “the SSN of the bondholder.”
That should not be conflated with the IRS limit of $5,000 per refund. The IRS limit regulates how many bonds can be purchased per refund and for how many people. The Treasury Direct limit regulates the total of those IRS refund purchases not exceeding $5,000 per the SSN of the bondholder (per year). They are actually two different limits that work in tandem.
Dunmovin says
Harry, it would be nice to see the lag/timeliness of irs having treasury issue ibonds using tax refunds especially since it’s been widely reported that some refunds for 2020 have not been issued. For example, reporting by your posters of irs return date, bonds received on, etc. Personally I may file by paper certified mail and track receipt OR just get a check.
Harry, what determines the bond issued date using tax refunds?
Thanks
Harry Sit says
I received the paper bonds one week after I received the direct deposit for the tax refund. The date your tax return is processed plus a week or two to fill the bond order determines the bond issue date. If you want your bonds fast, e-file.
Dunmovin says
One week after receipt of direct deposit for (excess I assume) for tax refund is not clear. How long from filing of tax return to bonds being issued/received? Thanks
Harry Sit says
About 25 days after e-file.
Chad says
Harry, thank you for an informative article. I am using H&R Block Premium and when I get to the How do you want your Federal Refund? page I can choose Direct Deposit or Paper Check. If I choose the Direct Deposit option I can select use part of my refund to buy U.S. Savings Bonds. At this point, I don’t have the option for the Learn More link to get to Form 8888. I am trying to buy some bonds for each of my children but I am never prompted to put names in. Do you have any insight to help me? Thanks!
Harry Sit says
I updated the post with new screenshots and hopefully clearer instructions.
Chad says
Harry, I appreciate the timely response. I am using the browser version of H&R Block Premium and I do not have the Forms button anywhere on my screen. I am happy to send you a screenshot. I have reached out to their customer service and they were of no help. Any other thoughts? Thanks again!
Harry Sit says
Online tax software doesn’t have all the features of downloaded software, and it’s more expensive than downloaded software. Switch to downloaded software next year. See Tax Software: Buy the Download, Not the Online Service.
I got this when I searched for “buy savings bonds” using the online help link on the upper right in H&R Block Online:
“To purchase the bonds:
1. Fill in a dollar amount for 1 bond purchase. This amount must be:
Less than your total refund
A multiple of $50 but not more than $5,000”
Apparently H&R Block Online doesn’t support buying I Bonds for other people. You can only buy for yourself (and your spouse if filing jointly) when you use H&R Block Online.
Chris says
So I am thinking about this for next year. I always do my daughter’s taxes. If I make an estimated taxes $5000 payment under her name and social next year on IRS.gov, sufficient to have a $5000 refund, I can then on her return, buy $5000 in I-Bonds in my name, even though I also buy them for me on my tax return?
Thanks… Chris
Harry Sit says
If she’s not using the opportunity to buy paper I Bonds for herself, sure.
Roy says
You might wish to read the reply to question #50 by “old mariner”. That reply seems to indicate that there will be issues buying more than $5000 total in paper bonds via tax refunds for a single bond holder’s SSN.
DB says
Is there a limit on how many times one can make extension payments per year, if paying by a combination of credit card and Direct Pay?
Thanks.
Tom P says
I filed my return with TurboTax on January 31st, got my direct deposit refund on Feb 16th, and received my I-Bonds today, Feb 25th. Amazingly, all 12 envelopes were stacked in ascending denomination and serial number order: 6x$50, 1x$200, 1x$500, 4x$1000. Gotta love those Albert Einstein’s 🙂
Dave H. in Yuma, AZ says
Those are exactly the denominations I received two days ago, also with the 12 envelopes stacked in order, 50’s on top.
Tom P says
Hi Dave,
Yep, that’s exactly how mine were stacked in the mailbox, 50s on top. Maybe all 12 envelopes are mailed in another envelope to the local USPS sort facility and then the delivery person takes them out of that envelope and puts them in the mailbox? How else could they possibly show up all in order? Very weird.
I’m thinking of converting these to electronic, but it’s also nice to have something tangible.
Tom G says
I requested $4000 in paper I bonds with my 2021 return. I received $4000 face value of I bonds in the mail. I checked the value of one of the $1000 bonds on the Treasury Site and it has a value of $500, which is consistent with buying paper EE bonds, you pay half the face value of a paper EE bond. I think I lost $2000 in the transaction. Am I missing something?
Harry Sit says
If you used the online savings bond calculator, maybe you left the Series selection at EE Bonds because that’s the default? Change it to I Bonds.
mr don says
Why bother using a tax refund to buy these ibonds? It does not increase the $10K investment limit. So just send the full refund to the bank then establish an account at treasurydirect.gov and buy the IBONDs you want at your convenience. No paper will be sent it will all be tracked electronically. You don’t have to worry about bonds being lost in the mail. You just need to keep track of your account numbers. Print out the page and put a copy in your safety deposit box or put a soft copy in a secure cloud storage somewhere. I encrypt my data before sending to the cloud for storage.
Steve says
The $5k does NOT count against the $10k limit.
Tom P says
Sorry “mr don” but buying bonds using your tax refund effectively DOES increase the $10K limit. In January I purchased $10K in my TD account, then purchased another $5K of paper bonds in February with my tax refund. Not sure where you are getting your incorrect information.
Chris says
False statement.
One can buy $10k from Treasury Direct and purchase an additional $5k from their federal tax refund.
Old mariner says
How much in I bonds can I buy for myself?
In a calendar year, you can acquire:
-up to $10,000 in electronic I bonds in TreasuryDirect
-up to $5,000 in paper I bonds using your federal income tax refund
-The limits apply separately, meaning you could acquire up to $15,000 in I bonds in a calendar year
Source:
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm
mr don says
My apologies, I will have to look to see where I got that “misinformation” that that income tax contribution to I bonds counts against the the 10K limit. Perhaps I misread it. Thanks, I am getting a ton back for 21 so I can direct it there.
thanks Don
mr don says
OK, here is where I misinterpreted.
https://thefinancebuff.com/overpay-taxes-buy-i-bonds-better-than-tips.html
“If only they ask for your TreasuryDirect account number on the tax return, they won’t have to mail you the bonds and you won’t have to mail them back in. While it is possible to direct deposit part of your tax refund into your TreasuryDirect account using a special routing number, when you use the money to buy I Bonds,>>>>>> you use up part of your $10,000/year quota,>>>> which defeats the whole purpose of overpaying taxes to buy additional I Bonds. The government has no incentive to make it easy. If you want more I Bonds, you’ll have to tolerate their process.”
The deal is if you decide to have your irs refund buy the ibonds and have the i bonds managed directly in your us treasury account and not deal with the paper $5K of bonds then the $5K is applied to your limit. So you will have to fiddle around with the paper bonds. Take the risk of lost in mail etc. It comes down to whether $350 (at todays rate) is worth the effort. I suppose its better than the mattress. 🙂
anyway thanks for pointing out my error
Old mariner says
Reporting in here:
–My return was accepted by the IRS on: 2/21/22
–My bank posted my refund on: 3/8/22
–I received all my paper bonds on: 3/12/22
I received 12 separate envelopes in this order: 6x$50, 4x$1,000, 1x$500, 1x$200.
Much thanks to Harry Sit for this article. I followed it to the letter even though I owed and paid no taxes for 2021. Only for I-bond purposes, I used Direct Pay for the first time ever, selected extension, and paid an amount similar to the $5,081 that Harry suggested.
I’ll also point out that H&R Block Deluxe 2021 doesn’t have a totally seamless way of accessing Form 8888. It instructs you to find the form and complete it. So, I had to find the form myself. Not a problem; however, it would have been better had there been a simple button to click to open the form. Also, there were no instructions on how to fill out the form. So, thanks again for this article which I read before I filled out my taxes.
I also maxxed out on the $10,000 limit for electronic I-bonds for 2022. So, now I’ll see what 2022 brings and whether I’ll do it again next tax season.
P.S. Harry Sit wrote a great article titled “How To Deposit Paper I Bonds to TreasuryDirect Online Account” (https://thefinancebuff.com/how-to-deposit-paper-i-bonds-to-online-account.html). I’ve done that previously, but for anyone who hasn’t, this is a great how-to.
Steve says
Old mariner,
I have followed that article “How To Deposit Paper I Bonds to TreasuryDirect Online Account” once and I plan to follow it again this year. It’s complicated enough that I’m happy for the step-by-step instructions.
Retired at 39 says
I also wanted to report in and thank Harry for the great articles that helped me do this. I followed your instructions with H&R block software. I filed for an extension online with form 4868 and paid 5,020 on 2/17. I also e filed my return that day.
My refund was deposited on 3/7. I received the paper bonds today in the mail.
4 $1000
2 $200
12 $50
(No $500 bond for me!)
I also had gotten a credit card with a bonus for initial spend so i got a $300 bonus that more than covered the $90 or so fee for paying with a credit card. Win win all around.
Thanks again.
Old mariner says
Just to add to my comment above, the paper I-bonds I received on 3/12/22 have an issue date of 03/2022.
Helen Keller is pictured on the $50 bond.
Chief Joseph is pictured on the $200 bond.
General George C. Marshall is pictured on the $500 bond.
Albert Einstein is pictured on the $1,000 bond.
mr don says
Several of you are using HRBlock so I am going to ask here. Maybe the problem is due to trying to use form 888. Anyway, on the 3rd page of 1040 line 35a is $36 less than line 34. I am requesting direct deposit. I tried contacting hrblock via chat and phone but in both cases I got dropped before we could discuss/chat. Maybe I’ll have to override that number and use snail mail for my return.
Have any of you other hrblock users experienced this?
Tom P says
Suggestion, switch from HR Block to TurboTax… works great and zero issues with I-Bonds 🙂 No need to fill out any special forms, TurboTax does it for you. If you file by snail mail it could takes months to receive your bonds and you’ll lose out on interest.
don says
I am using the desktop version of hrblock because last year I used TTax and it was very s–l-o-w. I think that that TTax switched to java. So that is why I switched to HRblock which runs native x86 code on a pc. I guess I could redo everything on the cloud, I just don’t like depending on the cloud in case something is wrong and I need to check it. I need to do some homework like back that 888 form out of there and then see if I still have the problem with hrblock. Only thing I can think of is that maybe hrblock is taking a cut out of the refund to pay for more e processing. However, it does not help my confidence in the whole thing if they can’t get something that simple correct.
Roy says
Please let us know what you figure out with H&R Block desktop version. I’m using the same, but I haven’t gotten far enough in my return yet to try using form 8888. If you remove form 8888 (so as if not buying any I-bonds with your refund), then do the amounts on form 1040 look correct or are they still off by $36?
Steve says
I used H&R Block Desktop edition and it worked fine for me, including form 8888.
Harry Sit says
H&R Block downloaded software works. I have the steps to split your refund into direct deposit and I Bonds in this post. Just follow the steps and make sure your split adds up to your total available refund. If your total available refund changed after you did the Form 8888 once, do it again and change the split.
https://thefinancebuff.com/overpay-taxes-buy-i-bonds-better-than-tips.html#htoc-h-amp-r-block
Old mariner says
I used H&R Block Deluxe 2021 (PC desktop version). I’m looking at pg 3 of my 1040. Line 34 is the amount of tax you overpaid. So, that’s something you would have input yourself. Line 35a is the amount of line 34 you want refunded to you in the form of papers bonds plus any cash refund (as opposed to applying it to your 2022 estimated tax). If using Form 8888, then Line 35a is the sum of Form 8888, which you also input yourself. It’s not H & R Block taking your money or charging you a stealth fee in some way. If you have $36 leftover, so to speak, then are you showing $36 on line 36 (which is the amount of line 34 that you want applied to your 2022 estimated tax)?
If I were you, I’d go back and make sure that what I input as my tax payments over the year is the correct amount. Then, I’d review Form 8888 to be sure that I input things there correctly. The sums of line 34 and line 35a should match, unless you are also applying some of your refund to next year’s estimated tax. If they don’t, I’m thinking somewhere along the way, there’s an incorrect input (by you…🕵️♂️sorry, just trying to steer you to find the error).
I’ve used the PC version of Block for many years. I’m happy with it (except when I’ve had problems activating it). Maybe it’s because I’m used to it. I doubt TT is any better or any more accurate, just my opinion.
Tom P says
FWIW, I used the web online versus of TurboTax, just as I have for the past 10+ years. I’ve never had an issue and it runs fast. You can try it all for free and don’t pay anything until you are ready to file.
Regarding relying on the cloud and whether the calculations are correct, during the year I estimate mine in Excel and TurboTax always has the exact same result when I have all my data at the end of the year.
don says
I looked at some previous versions where I did not have 888 and I find the same error. Somehow the amount I ask to refund is $36 less than I am entitled. That is $10 less error than what I got before. So the bug has been there all along. I just have not been looking at those numbers as I did my data entries. This the difference between line 34 and 35A on form 1040. maybe its because of some option I chose in error. The problem is right clicking does not lead to the source of the calculation. I need to chase this elsewhere, maybe reddit? I called hrb waited for about an hour and got dropped, with chat we chatted until he couldn’t provide an answer and then he dropped out. Not good support. In theory IRS should catch the error.
Harry Sit says
It probably calculated a small underpayment penalty. Go to Federal -> Taxes -> Underpayment Penalty. Change it to “I want the IRS to calculate the penalty for me (and send me a bill).”
don says
My bad, you are correct. Underpayment penalty despite the fact that IRS owes me over $10K. I think the issue is related to the fact that I had lots of income during 4Q, so hopefully by letting IRS do the calculation they will let me off the hook.
Old mariner says
If you’re seeing a penalty and your income was uneven throughout the year, you might also consider filing Form 2210 to annualize your income, in which case you might not owe a penalty.
don says
You are correct old mariner. My income was very uneven, lots in December. So HRB claimed a penalty despite my overpaying substantially. So I have decided to request a waiver for the penalty as you and others have suggested. The problem for me was that the HRB software did not indicate a penalty explicitly. Ideally, if I right click on one of those boxes it would take me to something that showed the penalty. Anyway, all is good now. This is one of those kinds of things where its best to set a problem aside and look at it a day later with fresh(er) eyes.
Thanks to all for your comments.
don
Mike says
The Form 4868 Extension of time to file workaround looked brilliant…until I tried it. On the PayUSATax online payment website, after filling in all the payment data, I got an error message: Payment may not exceed tax liability. In round numbers, my total tax liability for 2021 is $5,000, and I want to put in another $5,400 so my refund is over $5,000, for buying I Bonds.
The instructions for 4868 say nothing of this restriction.
Is there away around it? Thanks for your help.
Steve says
Does line 4 on form 4868 say “$5000” or “$10,400”?
Mike says
Thanks for the quick reply, Steve. For line 4 (estimate of total tax liability for 2021, I filled in $5107. I’m confused by the $10,400 in your question.
Steve says
I was using your round numbers. The form 4868 instructions don’t *explicitly* state that you can’t put a larger number on line 7 than line 6, but I can imagine PayUSATax interpreting them that way. Either write $10517 on line 4 and propagate the changes to lines 5-7. Or try different software to see if the programmers interpreted the IRS’s instructions differently.
Mike says
Actually, PayUSATax doesn’t even ask what I have already paid in (Line 5), via withholding and estimated payments. They object to what I’m trying to pay (Line 7) being larger than Line 4 (my total tax liability.) I feel a bit uncomfortable using $10517 in Line 4, as I know it is not true in my case, but thanks for the suggestion,
While awaiting your first reply, I did begin the process of paying it through IRS Direct, where the payment comes out of my bank account, and just short of entering my account number, I had NOT hit that same roadblock.
If even IRS Direct blocks me, I suppose I could just fill out Form 4868 and mail it to them with a check.
Harry Sit says
It sounds like it’s only an issue with PayUSATax that’s confusing you. IRS Direct Pay as shown in the body of this post doesn’t have that problem. EFTPS requires a login. IRS Direct Pay doesn’t require a login. You can make one-off payments through IRS Direct Pay.
Tom P says
Instead of filing form 4868 couldn’t you just make an “extra” tax payment via EFTPS before you file, assuming you already have an EFTPS account? Since I’m retired and don’t have much in the way of withholding I make quarterly 1040-ES payments and they are always much more than my tax liability.
Mike says
PayUSATax and Pay1040 (the credit card online options), both disallow paying more than your total tax liability.
IRS Direct makes you choose from a list of 14 reasons, among them “extension”, which then assumes Form 4868. Choosing “estimated” now lets you choose only 2022 tax year.
I don’t have an EFTPS account, but may try that if IRS Direct doesn’t work.
Thanks, all.
Old mariner says
I didn’t owe any tax for 2021 and didn’t pay any estimated tax for 2021. In February, I followed Harry’s instructions, used Direct Pay, selected extension, and paid $5,055 via a direct debit to my bank account. Direct Pay did not require me to set up an IRS account, which I do not have. Direct Pay did not ask about how much I owe. It just asks how much do you want to pay toward your 2021 tax obligation.
I didn’t owe a penny of that $5,055. It was purely to take advantage of acquiring paper i-bonds. The following day, I got confirmation of the debit to my bank account, then set about doing my taxes.
Direct Pay should work the same for you.
Mike says
Success! It worked with IRS Direct Pay. Thanks, Old mariner, and the rest of you for your guidance.
Art says
Received my fed tax refund promptly, just about a week after e-filing, and about a week later I got 1/2 my ibonds ($1000 of the $2000 that I had requested. ( I received 8 bonds total ) Hard to imagine these are processed separately, so I’m anxiously checking USPS informed delivery ( which tracked only 7 or the 8 bonds I received last week). How long should I wait … and is it best to delay e-conversion of the bonds until I have the full set in hand?
Art says
Update: Einstein showed up in my mailbox today, somewhat dog-eared but unopened … it did not get scanned by USPS informed delivery, so who knows where it’s been for the last 5 days. I’m just happy it arrived!
Old mariner says
That’s great news, Art. Good that you’ve received all of your bonds.
Tom P says
FYI, when I submitted my bonds this year to Treasury Direct the receipt email I received said it could take 4-6 weeks to process. Today I checked and they are all in My Converted Bonds linked account. The process took a max of 3 weeks, so less than expected.
Sun says
Hi Harry,
Thanks so much for the detailed post!
I made payment via direct pay, bank account. My bank account was debited on 3/28. But my IRS account still shows this extension payment as pending. How long should does it generally take for this extension payment to be credited to my account? Should I wait until it is credited to my account before I submit my tax return.
Regards,
Sun
DB says
I have noticed it takes a couple of business days for Direct Pay payments to move from Pending to processed.
I don’t know what the correct process is, but I went ahead and e-filed my taxes after IRS debited my bank account although the payment was still in pending status. It didn’t seem to have caused any problems as IRS accepted my return and sent the correct refund including I-Bonds.
DB says
I forgot to mention that IRS had already received my extension request due to an earlier extension payment using a credit card processor. If this is your one and only extension payment, then perhaps it is best to wait until IRS indicates they have received your extension request prior to filing.
Harry Sit says
I’d give them at least a week or until you see it posted. Cutting it close may still work but why take the chance? I made my extension payment three weeks before I e-filed my return.
Don G says
Can a married couple file separate tax returns, so that each can use their ($5,000 limit) refund to buy a paper I-bond? This, instead of filing jointly, and being limited to $5,000 together.
Harry Sit says
They can, but their taxes are often higher when they file separately. For example, they won’t be eligible for the premium tax credit on ACA health insurance when they file separately.
RL says
Curious if anyone else is experiencing the problem described in the “When Something Goes Wrong” heading in the article. My federal tax return, including Form 8888, was filed and accepted on 3/14/22, with a $5,000 refund in the form of paper I bonds and a low three-digit cash refund. Today (4/6/22), I received 100% of the refund amount via direct deposit, despite the IRS “Where’s My Refund?” site mentioning the purchase of bonds.
Do we have any more insight as to why this happens and how to prevent going forward?
Harry Sit says
Sometimes you do everything right and it still doesn’t work. No one knows why. You just have to try your luck again next year. Did you include cents on your tax return by any chance? It works better if everything is in whole dollars.
Old mariner says
That’s disappointing.
Here’s what IRS form 8888, pg 4, states:
“Your bonds won’t be issued if any of the following apply.
• The bond request isn’t a multiple of $50.
• Your refund is decreased because of a math error.
• You enter more than one name on line 5b, 5c, 6b, or 6c.
• Your refund is offset for any reason.”
One other thing I can think of is if another taxpayer used their refund to gift you I-bonds, which then triggered a stop on your own purchase so you didn’t go over the $5,000 limit per recipient (bondholder).
If you don’t fall into one of the categories above, then I don’t know why. 🤔
Ed says
I have the same problem as you. I filed my tax on 4/5 using H&R (fed+state) desktop version software. On 4/15, I received the 100% of the refund amount ($6004 instead of $1004) via direct deposit to my bank account. The IRS “Where’s My Refund” page indicated the purchase of bonds. It says I should get direct deposit by 4/19. The description of my direct deposit says “Early Pay ACH from IRS TREAS”. I happen to have federal tax overpayment of $6004 and I did NOT file any extension. On form 888, I entered $5000 in line 4 only. So I don’t know what went wrong in my case?
Is there any chance that IRS or Treasury recently changes the bond buying process so that IRS first gives 100% refund via direct deposit but Treasury debits $5,000 from your bank account later when the bonds are actually issued? Though, data points did’t suggest that other than now some people receive single bond with $5000 denomination instead of multiple smaller denomination bonds.
RL says
Thanks for the reply, Harry. Cents were entered into TurboTax, but it automatically rounds to whole dollars so that’s how the return was submitted. The refund amount was identical to the whole dollar on Form 1040 itself, Form 8888, and as direct deposited by the IRS.
Bud B says
First, thanks to Mr. Sit for this thread on the paper bonds via tax return.
I used Turbo Tax Premier Online and my Form 8888 looks accurate, but I also got a full refund deposed into my checking account. I allocated well less then the $5000 maximum to two bonds, each in a $100 increment. My children were listed as beneficiaries for the two bonds (one each).
I called Turbo Tax and they initially said it must be the IRS. To which I replied ‘that may or may not be true’ since there is an interface between Turbo Tax and the IRS software. The Turbo Tax rep backed off and saw my point, but as a second tier customer service rep (was passed to him by the tier one rep), I don’t think he is at a level to say whether there are known problems with either the Turbo Tax software the IRS software or both. In the end, they refunded my Turbo Tax fee. Now I will pursue with the IRS after waiting to see if they correct the problem and change my direct deposit in the next week or two.
Tom P says
Ditto to Harry on this thread… very useful. I guess I got lucky in that I e-filed early on January 31 and had no issues using TurboTax Online Deluxe to split my refund via direct deposit and bond purchase. In my case I could have just indicated I wanted a bond purchase for “yourself (and your spouse…)” and indicated that amount on line 4. However, I supplied information that resulted in the amount being entered on line 5a, my name on line 5b and my spouses name on line 5c because I wanted the bonds to be in the same exact names as the bonds I had already purchased at TD, which included our full middle names instead of just initials from the 1040. Did this make a difference? Heck if I know. If Bud B’s Form 8888 is correct it seems something is amiss and the IRS should work to resolve it… but good luck with that considering the current backlog.
Harry Sit says
It just happens to some people with no rhyme or reason. You give it your best shot and leave it to fate. The IRS won’t reverse the direct deposit to re-order bonds for you. Try again next year.
RL says
So this gets even more interesting. I received today (six days after receiving the direct deposit) a CP24 notice from the IRS, which indicates that they revised my 2021 1040 in order to match their records of estimated tax payments, credits applied from another tax year, and/or payment received with an extension to file. The payment + extension filing is the only thing from that list I did in 2021, and reported it per the article’s instructions when using Turbo Tax Premier Online.
What’s odd is that the CP24 shows both my calculations and the IRS’ calculations, and THEY ARE IDENTICAL. To the cent. The IRS refund number on the CP24 is identical to the amount listed on my 1040, my Form 8888, and the amount that was direct deposited. However, on the CP24, the IRS characterizes the amount I paid under Form 4868 as an “Other payments received” instead of under the line that reads “Estimated tax payments, Form 1040 line 26, SCH 3 line 10.” I confirmed that this amount was reported on my 1040 I previewed before filing and was correctly entered in Line 10 of Schedule 3.
Seems the IRS is mischaracterizing payments made under Form 4868 as an “other payment” instead of estimated tax payment as they should have, which resulted in no bonds being purchased.
I think one of the below is the reason for the erroneous processing of the return and not issuing the requested paper Series I Savings Bond refund:
1. The IRS won’t issue paper Series I Savings Bonds in a year where the taxpayer would have owed over $1,000 in taxes and didn’t make estimated tax payments throughout the year (either quarterly or via extra payroll deduction), EVEN IF that taxpayer was not assessed any tax underpayment penalties. This happens to me in alternating years because I “double up” on charitable deductions every other year, and take the standard deduction in the other years. However, no underpayment penalty has ever been assessed because I always get a refund in the “double-up” year and have never paid less than 90% of tax owed for a given year in any event.
2. Perhaps I did not wait long enough after making my separate payment with requested extension under Form 4868 until I filed my 1040. I waited to file the 1040 until the funds had left my account and the status on the Direct Pay website had changed, but perhaps one should wait a few weeks to ensure everything is finalized on the IRS’ end.
3. There is some issue with Turbo Tax’s submission and/or integration with the IRS payment system that is affecting users. Curious to know if anyone else that had 100% direct deposited also received a CP24 notice afterward. Bud B?
Is there a recommended minimum time to wait to file one’s 1040 after they make a payment under Form 4868?
Best,
-RL
Harry Sit says
I would say wait at least a week before you file. I waited 15 days and I received I Bonds successfully. It may not be strictly necessary to wait that long, but giving it a little more time can’t hurt.
Bud B says
@RL regarding your #3:
I have not gotten a IRS CP24 unless Turbo Tax intercepted it or the USPS mail is slow.
I do pay estimated taxes via a service as I employ a domestic employee. They do all the work with the IRS and the state and send me the year end tax info, but I input all the info into the Schedule H.
I also pay payroll taxes.
All tax payments match exactly.
BuffierThanThou says
Hey Bud!
Had the exact same issue as you with TurboTax. Just another datapoint.
Bud B says
I think I found the source of my problem after reading an unrelated article about people having all sorts of problems having their refunds accepted (glad that’s not my case). It prompted me to go to the “where’s my refund” IRS site. I had not done that since I thought it was going to tell me the obvious: I had gotten my refund. Bear with me here.
Step 1:
IRS site confirmed my refund (although the date that the refund was sent was not the same as the direct deposit) and listed two possible problems:
• The bond amount you claimed was not in a multiple of $50 or it exceeded $5,000.
• You owed a past due obligation to which we applied part or all of your refund.
Since bullet one was not true, it must be bullet two. The site directed me to Topic #203.
Step 2:
Topic #203 listed these possible reasons for the Bureau of Fiscal Service (BFS) to reduce your refund (overpayment) and offset it to pay:
• Past-due child support;
• Federal agency non-tax debts;
• State income tax obligations; or
• Certain unemployment compensation debts owed to a state (generally, these are debts for (1) compensation paid due to fraud, or (2) contributions owing to a state fund that weren’t paid).
Even though I didn’t think any of these were true, the last bullet got me thinking, maybe this does have something to do with my domestic employee and the service I use to pay the estimated taxes.
Step 3:
Check the refund amount in the bank account more carefully and check both the exact estimated taxes my service paid the IRS AND the amount listed (by Turbo Tax) on Form H.
Results: (numbers changed to protect the innocent)
Refund listed by TT: $2345
Refund deposited$ $2344.67
Estimated taxes paid by service: $3333.67
Estimated taxes as listed on Form H and 1040 line 26: $3334
Voila! That cannot be a coincidence.
My conclusion is that because the exact dollars and cents do not match exactly no bonds were issued. I “owed” more than refund listed on my return and I was issued a slightly smaller refund. If there is another cause, then it is something I probably will not take the time to look into. I suggest that all of you that have had problems look at your estimated taxes paid for a clue. Appreciate any feedback and I would gladly entertain challenges to my conclusion.
It does bring up all sorts of issues though:
1. TT rounds all amounts, so this could always cause a problem if estimated taxes are rounded up. (H&R Block users?)
2. It would be interesting to see if estimated taxes are rounded down if the IRS/Treasury would issue the I-bond since I would technically be owed a slightly larger refund and may be issued a larger refund (wouldn’t “owe” that fraction of a dollar on my return). Or if they would reject also.
3. The IRS does not seem to have a problem with the fact that my payroll taxes (W-2) are rounded to the nearest dollar (for this year rounded down).
4. Perhaps if I send in a extra estimated tax as Mr. Sit recommends in the article I can make the TOTAL estimated taxes add to a whole number and eliminate this ‘problem’.
5. Why hasn’t TT been able to figure this out with the IRS?
Good luck to others investigating (RL, Ed, BuffierThanThou) and those commenting (Harry Sit, Old mariner, Tom P, DB, Roy, Art) and anyone I forgot.
Harry Sit says
I think you found the root cause of your case. The lesson is to keep estimated taxes in whole dollars. If a third party paid estimated tax with dollars and cents, you make it up to whole dollars. This doesn’t apply to withholding. Don’t make up the cents in withholding with an estimated tax payment in cents. This post on Bogleheads Forum explains it:
https://www.bogleheads.org/forum/viewtopic.php?p=6592439#p6592439
Old mariner says
@Question 81, Bud B reply on APRIL 16, 2022 AT 7:41 PM
Wow, Bud B, that’s an impressive analysis. I think you’ve cracked it.
You definitely deserve that beer next month on the beach.
Bud B says
I’d say this a joint problem for Turbo Tax (& other tax software products) to fix with the IRS. I cannot believe it is ‘random’. What Turbo Tax presents to me with their software is not the same as the 1’s and 0’s it sends to the IRS. Assuming there is some amount of software testing conducted jointly, the responsibility is joint and the testing in this case is incomplete. Though, I would point out that only one party in that venture is a for-profit company that presents itself as the premier tax software preparation corporation with over $9B in revenue and over $2B in net income who paid its President/CEO almost $25M (‘just the facts ma’am’ – Joe Friday).
While it would be pleasant to hear a follow-up from Turbo Tax that they have looked into it and assigned some software engineers and test & verification personnel to the problem, my initial thought is that it is cheaper for them to just issue a refund and avoid spending time, resources, and money on the problem until someone calls them out publicly for the problematic software.
By the way there are related threads on the following sites regarding this problem: Intuit, Bogleheads, Reddit.
Certainly not the end of the world, but it lowers my opinion of Turbo Tax by a few points on the scale of 0-10.
Thanks for your time.
DB says
If you suspect the problem is in between Tax SW and IRS, I’d think you can request the tax return transcript to find out exactly what Turbo Tax transmitted to IRS? Check the Form 8888 information in the transcript to check if it matches your return.
Tom P says
I agree, it can’t be random, it has to be a software error on someone’s part for certain input scenarios. As I said, I guess I was lucky, so with that in mind I’ll input the same scenario next year and see if it still works. Bud really is owed a resolution from TT even if they did refund his money. After all, they have a 100% guarantee of your return being correct. On the other side, none of this gives me any confidence that “da guvmint” knows what the heck they are doing.
Old mariner says
I used H&R Block Deluxe + State (download for PC) and did receive my paper I-bonds, but it’s possible someone else using the same software didn’t receive their bonds. I only filled in an amount on line 4 of form 8888, which was to purchase bonds for myself and spouse jointly. Maybe there’s some sort of issue when a name is added for lines 5 and/or 6.
Since the IRS is the entity that didn’t fulfill the order, it seems the IRS should be able to tell you why it didn’t. You could call the IRS, maybe after the 15th, to ask what happened.
Roy says
I used the exact same software as Old mariner – H&R Block Deluxe + State (download for PC). However, I did not enter information on form 8888 line #4, and instead entered information on lines #5a, 5b, and 5c. 4 days ago my refund was posted via direct deposit to my bank account, and the amount was as expected – $65, not $5,065, just as specified on form 8888. I expect to receive my I-bonds this coming week or next.
RL says
Bud B, I just posted an update in a reply to comment thread #81 (right above your comment #82 here). Did you happen to receive a CP24 notice from the IRS after receiving 100% of your refund via direct deposit?
Maybe we can put our heads together to try and figure out whether this is a Turbo Tax or IRS issue.
I wonder if anyone that used H&R Block had a similar issue this year.
Bud B says
RL see above for another comment. Appreciate your concern on this matter. I’m too busy to post more than weekly.
And per my earlier post, I did fill out lines 5a,b,c and 6a,b,c.
I’ll be looking for my Turbo Tax refund this weekend and certainly follow-up with them especially if it has not posted.
I’ll definitely consider H&R Block software next year as well as filling out line 4 vice 5&6.
Last on the list would be contacting the IRS. Maybe I’ll do that while I’m at the beach next month sipping a beer 😉
BuffierThanThou says
RL/Bud-
Same issue here. Used TurboTax. Over $5k refund. Filled out lines 5a,b,c.
Tax refund adjusted down by like 30c and got 100% as a DD. Got a CP24 from IRS in the mail.
Art says
Not sure what happened here, and it’s a shame that Bud’s ibond order got messed up … but for future returns, you might want to consider H&R Block software. TT was requiring a system update and I wasn’t about to stop tax prep to do a full computer backup and OS update. I was a bit nervous, since I had used TT for about 20 yrs, but it was a pretty seamless transition. The turbo tax return from the prior year imported easily and the only things missing were the annoying animations and graphics. Turbo has better “help,” but … despite a barebones design, H&R was adequate for my purposes. Decided to stick with it again this year and made a tax refund ibond purchase for the first time. The process was pretty smooth ( the only confusing part was the way it asked about bond registrations). Got my partial fed refund direct deposit in 8 days and most of the ibonds the following week. One straggler bond showed up 5 days later. My state return is still in limbo, but that’s probably more a reflection of DC tax processing than the tax software. It won’t solve your problem this year, but it might be worth considering for future ibond purchases. ( I should add that I used the downloaded software — some folks have experienced problems with the online version. )
Old mariner says
This is in reply to RL, who replied to Question 81: That’s very interesting about the CP24 Notice. It does answer why you didn’t get your bonds, i.e., the IRS adjusted something on your return. But it doesn’t answer *why* they made that particular adjustment. Is there a phone number on that notice? Maybe you could call and ask what happened. You’re on a good detecting trail.
RL says
Thanks, Old mariner. Looks like simply receiving a CP24 Notice actually *doesn’t* mean one cannot receive paper I bonds, given Retired at 39’s note below in comment #85.
There is a phone number on the CP24, along with some other ID information. I spoke with a very kind IRS representative today who walked through the issue with me and agreed that none of the listed reasons for refund request rejection in the instructions to Form 8888 applied. She could not after independent research determine why the bonds were not purchased, so has escalated the issue and I was told I’d have a paper response within 30 days. I’ll update the comment section below if I learn anything else helpful.
Retired at 39 says
Another data point.
I posted previously. I filed using H&R Block. I filed on the same day I made the extension payment. I received my $5,000 bonds without issue.
I ALSO received a CP24 indicating they were adjusting my tax payments but the tax calculation was equal. At the time, i couldn’t figure out what was different. But like RL, the payment is now shown as “other payments received.”
RL says
Thanks for sharing. Could you specify the timing of those events (i.e., how long from filing you received your direct deposit refund, paper bonds, and the CP24)?
DB says
Another data point: I filed using H&R Block download SW. I made both estimated and extension payments and filed the day final extension payment was debited from my account. I received both the refund and I-bonds as requested.
H&R Block download SW handled estimated tax payment and extension payments differently. It reported estimated tax payment on line 26 of 1040 and extension payments on Schedule 3 line 10 (also repeated in line 31 of 1040). IRS appears to have been happy with that and I did not receive a CP24.
Dougie says
Using TurboTax, I am ready to e-file my 2021 return. I owe $1052. Instead can I use TT to e-file an extension and pay say an even $6100. Then I plan to use TT In mid-May to e-file my return and ask for $5000 in I bonds plus a refund of $48 (or maybe slightly less if the IRS charges me a small amount of interest). This should work, right?? If it does, then great but since I am late at filing the extension with the large overpayment, I will miss earning 6 months interest at the current 7.12% annual rate. But better late than never! At least it looks like the May reset for I bonds interest could be at an annual rate around 9.5%. Thanks for an excellent piece of information, only wish I had read it in early March.
Harry Sit says
Filing an extension and making the extension payment through TurboTax also works. I prefer to use IRS Direct Pay because it’s more direct. You’ll need to file and make the extension payment by April 18 either way.
SP says
Don’t know if this is new for this year, but received just a single $5k bond in the mail just now. Marian Andersen on the front. (Which makes this conversion process that much easier!)
Harry Sit says
I hope they start doing that for everyone. I still received my usual 12 bonds in 12 envelopes.
Tom P says
Maybe they temporarily “ran out” of the other bond denominations, or finally figured out it was less costly to send one bond instead of 12? I received the usual 12 bonds in 12 envelopes in early February. The Einstein bonds are my favorite of course, I actually hated to send them to TD for electronic conversion, but figured having them all in one location was best 🙂
Roy says
Same thing happened to me. One $5k bond arrived in the mail yesterday.
Tom P says
That’s interesting because the TD website still says paper bonds are only available in $50, $100, $200, $500 and $1000 denominations, although a search on treasury.gov shows that these plus a $75, $5000 and $10000 were introduced in 1998-1999. At the time you could purchase $30,000 per year.
Roy says
Perhaps they are running low on other denomination of paper I-bonds? I was a bit concerned with USPS Informed Delivery showed me only a single Treasury envelope on the list to be delivered, but when I opened it I found inside a single $5,000 Series I bond. FYI – also interesting is that I specified a Beneficiary when I ordered this bond via my tax return, and there is a POD (Payable On Death) name listed right on the bond.
Tom P says
Anyone else try to predict or calculate the I-Bond interest rate? I looked on TD and found this formula: I-Bond Rate = (Fixed Rate + 2 x Semiannual Inflation Rate) + (Fixed Rate x Semiannual Inflation Rate); using CPI-U numbers.
The current fixed rate is 0.00 and the current I-Bond rate is 7.12%, which means the semiannual rate calculated was 3.56% or 0.0356 as indicated on TD.
I was able to produce this result by using the CPI-U numbers from Oct 2021, 276.589 and from Apr 2021, 267.054. I rounded these to 1 digit, then calculated [(276.6/267.1) – 1.0] and rounded to 4 digits, leaving 0.0356.
Looks correct, or maybe my math was just lucky 🙂 If so, extrapolating the inflation number for Apr 2022 to 290.5 and using 276.6 for Oct 2021 shows the I-Bond rate effective in May could be about 10%.
Harry Sit says
The applicable periods are March to September and September to March. The next adjustment will be 9.62%. It’s already updated in the opening paragraph of the “How to Buy I Bonds” post.
Tom P says
Ah, that ‘splains it. Thanks Harry for the clarification. The formula works fine now.
snic says
I used H&R Block software as described here and had no issues. I also received a single $5k bond today. I guess one reason why they one might want smaller bonds is if you need to cash out less than $5k, you’d just cash out what you need. I guess I’d have to cash out the whole bond… or is there some way, once I convert the bond to electronic, to cash out just a portion of it?
(BTW, Thanks, Harry, for this very informative web page!)
Harry Sit says
Once it’s in your online account, you can cash out partial amount. The minimum cash out amount is only $25.
mrdon says
I think there was a link somewhere that explained how to transfer the paper I bonds to electronic ones but I’m not finding it. Can someone kindly point me to it? Like others I used Hrblock desktop, refund in about 2 weeks and then a 5K Ibond about a week later.
Harry Sit says
Scroll up and find the “Deposit Paper I Bonds to Online Account” section in this post.
mr don says
thanks Harry. Just doing a search on “deposit” finds it. That is quite an ordeal. I’m thinking I will put mine in the safety deposit box at the bank along with the information on accessing the E account. That way my heirs will be reminded when they see that nice colorful bond. I agree this is not the kind of thing to keep at home due to thefts, fire, etc. It does spook me how the gov’t just sends these things out in the snail mail with no tracking. At least they don’t require a Medallion signature. That’s another long story, a requirement guaranteed to slow you down.
Tom P says
Don, I’d give it a try… you have nothing to lose but a few minutes of your time. I did it for the 12 bonds I received and it only took maybe 15 min to setup the linked account, enter the bond numbers (which I already had in Excel, so just copy and paste), and print the manifest. Since you only have one bond it’s that much easier. I sent my bonds to TD in a normal #10 envelope and they received them without issue. I took pictures of the bonds before sending.
BuffierThanThou says
Had a $5600 refund. Requested $5k in bonds, $600 DD. Got all $5.6k DD. IRS letter a few days later says my refund amount changed and that’s why. But it didn’t change?
IRS sucks.
BuffierThanThou says
Apparently this is a TurboTax issue. F TurboTax.
Harry Sit says
I received I Bonds successfully using TurboTax downloaded software with lines 5a/b/c. No CP24 notice from the IRS.
Tom P says
Well, as I’ve stated I had NO issues using TruboTax online Deluxe. I filled in 5a, b, c; got $6414 DD and $5000 in 12 bonds.
Maybe the IRS is intentionally trying to screw people out of their bonds by claiming to “adjust” their refund because they are so popular right now. Dunno, but I guess I got lucky.
BuffierThanThou says
I used TurboTax online edition — maybe that makes a difference? @Tom P which version did you use?
BuffierThanThou says
Nvm, I see you used Online Deluxe. That is weird indeed.
There are people on Boglehead etc. also saying they had this issue with TT and the IRS.
Bud B says
See my comment at #81 above. Cheers.
Tom P says
Many thanks to Bud and his detective work. Nice job, but unfortunate for you! FWIW, TurboTax always calculates my 1040ES payments as whole numbers; they take 110% of taxes due, less withholding paid, divided by 4 and rounded o nearest dollar (and these calcs always agree with mine). I pay my estimated payments via EFTPS, and when I do my taxes using TT online Deluxe I round all inputs (in the normal way, anything 50 cents and above gets rounded up, i.e. using the ROUND function in Excel) BEFORE typing the numbers into TT. I don’t let TT “pull” numbers from Fidelity, etc.
My return was more complicated than the usual simple one this year because we rolled over three of my wife’s old work accounts into a rollover IRA, and I also had a Roth conversion. It all worked fine and I got my bonds as requested.
It seems like some of those criticizing TT should check their returns as closely as Bud. They might owe TT an apology.
Dunmovin says
Q Filed return with 8888 (with $5K expected in paper bonds) attached by US Mail with a tracking receipt showing IRS received it in February 2022. I’ve heard nothing. Going to Where’smyrefund results in they show nothing. Anyone having any issues with filing by US mail and getting or not getting “refunds” in paper ibonds? Thanks
Art says
Keep an eye on your bank account, as that was the first sign of progress. My direct deposit portion of the refund came 8 days after I filed. That’s how I knew the fed return had been processed. The paper ibonds appeared ( well most of them) in my mailbox about a week and a half later. After registering them and mailing them back ( with tracking) I got the post office notification of delivery online, as well as the paper return receipt about 5 or 6 days later. An email confirmation from Treasury confirmed that the paper bonds had arrived. They still haven’t been processed — I check back periodically, but it probably will take a month or so before treasurydirect account shows them credited.
Roy says
Well, you can’t get the I Bonds until you get your refund, and you can’t get your refund until the IRS processes your return, and the IRS is waaaay backed up in processing paper returns. I think the issue is likely not at all related to the fact that you asked for I-Bonds with your return, but is likely due to the large backlog at the IRS in processing paper tax returns. Nothing you can do at this point, but for next year file electronically to get a more predictable and quick response from the IRS.
Dunmovin says
Thanks…but anyone have any actual personal experience one way or the other?
Art says
Forgot to add, the refund delay is probably due to the fact that you submitted a paper tax return — the electronic ones are processed much more quickly.
Mike says
Dunmovin, I entered this discussion back in March, on post #70. Like you, I mailed my paper return to the IRS. From what I’ve heard, it may take a loooong time before anything happens due to the processing backlog. I don’t think I’ll even try “where’s my refund” until late May. Good luck to you! And please post when you learn something.
Dunmovin says
Thanks, Mike…let’s keep communicating…anyone else with ACTUAL experience of paper filing of returns by US mail with 8888 attached?
DB says
Dunmovin, I did mail the paper return with form 8888 attached last year. Filed in the second week of May. The return was not processed until October and I received the direct deposit refund and paper bonds in mid to late October. It could take just as long or even longer this year. That is why I eFiled this time around.
Donald Graves says
Late side note: If you filed a paper return for 2020 (like we did), the IRS may still not have it processed. Therefore when you try to e-file for 2021, and enter your 2020 AGI as verification, the IRS will reject your e-file (because they still don’t have record of it). Therefore, YOU NEED TO ENTER 0 AS YOUR 2020 AGI.
It was the same darn thing the year before too, and probably will be, year after year, unless you break the chain, and e-file, entering 0 as the previous year’s AGI. (I had to get this answer last year from our US Senator Mike Lee, since IRS would never reply.) Sorry, I didn’t think to post this BEFORE April 18, but if you did as suggested, and filed for extension, and paid additional $5,000, then maybe there’s still time for you.
Having done this, we got our $5,000 I-bond in a couple of weeks, and the excess deposited.
Dunmovin says
Thanks, DB. I never efiled for any year…always paper. Sooooooooo, looks like more time to wait for receipt of hard copy of ibonds. Anybody else with stories about/resulting from filing paper return?
Ed says
I filed my tax on 4/5 using H&R (fed+state) desktop version software. On 4/15, I received the 100% of the refund amount ($6004 instead of $1004) via direct deposit to my bank account. The IRS “Where’s My Refund” page indicated the purchase of bonds. It says I should get paper bonds within 3 weeks. But as of 4/22, IRS still has not taken back 5k from my bank account. On form 8888, I entered $5000 in line 4 only. So I don’t know what went wrong in my case? I happen to have federal tax overpayment of $6004 and I did NOT file any extension. I did not use cents in my tax filing.
Impossible to get through IRS by calling. Is it the issue with H&R software, IRS or US Treasury?
Is there any chance that IRS or Treasury recently changes the bond buying process so that IRS first gives 100% refund via direct deposit but Treasury debits $5,000 from your bank account later when the bonds are actually issued? Though, data points did’t suggest that other than now some people receive single bond with $5000 denomination instead of multiple smaller denomination bonds.
Harry Sit says
Once you receive 100% of your refund, it means your request to buy I Bonds failed. The IRS won’t take back $5,000 to buy I Bonds for you. No one knows why it failed. You can only try again next year.
Donald Graves says
I also e-filed with H&R Block software – the only difference from you is that I used line 5a to enter the $5,000, and then designate a beneficiary. I got the bond via USPS, and direct deposited change in 2 weeks.
Just to compare with my 8888, you should have $1,004 on line 1a, $5,000 on line 4 (as you said), and then $6,004 on line 8. If so, then there’s no telling why the different outcome
RL says
As a follow-up to comment #80 above and subsequent responses re: my situation, I called the IRS and spoke to a helpful rep who escalated my question about why 100% of my refund was direct deposited instead of I Bonds being purchased like I had instructed. The rep escalated the matter and I received a letter in the mail recently which said in relevant part:
“The cause of the full eligible refund being issued without the designated portion being applied to the purchase of an I Bond is due to an extension filing.
“The tax due with the return was paid as remittance with the extension to file which was posted to the account the same day as the 1040 return filing. You may also purchase I Bonds if you have a TreasuryDirect account.”
Not super helpful, but guess the takeaways for next year are: (1) wait a week or two after filing the extension and having any extension payment processed before filing the 1040 and (2) try not to have any taxes owed before filing the extension, perhaps withholding more than the $5,000 throughout the year. I know other people have not had problems with #1 and filed the 1040 and extension the same day.
Not very helpful, but not sure what else I expected from the government. Wish they’d just raise the purchase limit generally and get rid of this paper I Bond refund nonsense if they aren’t going to be consistent with how they process the requests.
Tom P says
Not sure why people go to the trouble of filing an extension to “overpay” their taxes when all you have to do is make a 1040ES payment before you file to accomplish the same thing. I’ve been making 1040ES payments for years because normal withholding was inadequate due to four sources of income, and it was very easy to setup the quarterly automatic payments via EFTPS.
I do agree that the paper bond purchase restrictions are ridiculous. Why restrict purchasing to only via tax refunds; anyone should just be able to go on TD and order paper bonds, especially if you want them as gifts for grandkids or whatever.
Old mariner says
That’s a great follow-up, RL. I totally agree with your last paragraph.
Old mariner says
I didn’t know about this paper i-bond thing until I read Harry’s article in late January. It was too late to file an estimated tax, so I filed an extension through Direct Pay. I didn’t file my tax return until after I confirmed that the funds paid with the extension had been withdrawn from my bank. I don’t know if that made a difference or not.
To me, the issue is the secret, obscure, IRS procedures that deny the issuance of the bonds without explanation or remedy. My opinion is just raise the Treasury Direct limit to $15,000 (or more) and remove the IRS from the process. I don’t even know why the Treasury is issuing paper bonds. Seems like a waste of paper to me. I mean, I received 12 bonds in 12 envelopes and immediately converted them to electronic. So, a total waste of paper with respect to me.
Bud B says
Closing the loop on comments 81, 82 & 95. Thanks to all for all the feedback on this topic.
1. I received a CP53 notice in the mail yesterday from the IRS confirming that my refund was off by a few cents confirming my analysis above.
2. I’ll contact the service that calculates my domestic employee’s payroll, but doubt that they will change estimated taxes to whole dollars.
3. Marked my calendar for January 15, 2023 to examine the statement from the service, so I can make an estimated tax payment to round to an even dollar amount if desired.
4. I still think that Turbo Tax shares some of the responsibility for the non-issuance of the bonds (at least the false expectations). They could write a few lines of code that would check estimated tax payments to see if they are an exact dollar amount (after all I did enter them exactly as reported and Turbo did the rounding). That fix might result in getting feedback during the process that says: “you are not eligible for the bond purchase because your estimated taxes are not in whole dollars”.
5. Will have my children set up Treasury Direct accounts to register their bonds and buy more as desired.
6. Will consider making estimated taxes for them during the year to make the paper bond purchases, but at their age stocks are probably a better long term investment.
7. Remember to write my congressman about increasing the limit on bond purchase. In the end whatever laws they pass set the limit (guess it could also be an executive order, but I’m not taking the time to research).
Tom P says
I’m having trouble understanding why ANY 3rd party service would submit estimated tax payments in anything other than whole dollars. After all, it’s ESTIMATED, not final 🙂
mrd says
Just a guess, but I wonder if this is aimed at lower income groups who would never put money into a bond but if someone like HrBlock or just a volunteer helps them with taxes, and they typically get some kind of refund and then the helper points out how this is a good way to save which they ordinarily would not do. Its just an odd process.
Dunmovin says
Bud, make TD gift purchases now for Ibonds and deliver later …that way Ibonds start earning 7.12 this week from April 1st!!!!
Tom P says
Dunmovin, good suggestion… I did just that last week. Bought $10K for my wife and she bought $10K for me as gifts. If inflation is still high next year those may remain in our gift boxes for delivery in 2024 and we’ll buy more normally in 2023. As Harry has said, you don’t want to go crazy with this since you could be forced to hold the bonds for years before “delivering” them due to the annual purchase limit.
Art says
I must have missed the explanation. How does this work? The “deliver later” gift gets calculated against recipients’ future year $10k purchase limit, and they can still buy an additional $5k via tax refund? Sounds like the “gift” earns current interest from the date of purchase? Does the one year holding requirement countdown start immediately, or once they actually deliver the gift? Sounds complicated, but a potentially useful strategy for accruing additional interest.
Harry Sit says
Gifts are covered in Buy I Bonds as a Gift: What Works and What Doesn’t. Let’s keep this post on getting paper bonds from the tax refund.
Tom P says
Yes Art, that’s how it works. The gifts can stay in the gift box as long as you want and they start earning interest and maturing from the first day of the month you purchase. When you deliver them to the recipient they will count towards the recipient’s yearly $10K limit in the year delivered, so in my case I might decide to deliver them next year and only get another $5K via tax refund… just depends on the current rates in 2023 and whether I have any extra funds to buy more bonds in 2023 and continue to hold the gifts for another year. I just wanted to take advantage of the current high rates. Harry has a great write-up on all of this… I’m so glad I discovered his blog!
MFRP says
Not sure what exactly happened in my situation, but it sounds similar to the replies above. I used H&R Block Deluxe desktop version and followed the directions for splitting the refund between direct deposit and $5k in bonds exactly. I learned about this method after the 4th quarter estimated payment was due (I do make estimated payments normally) so I made a $4500 extension payment in late March to get my refund over $5k. I waited until a few days after the extension payment had been withdrawn from my checking account before I filed.
Today I received the full refund ($5256) in my checking account. H&R had calculated my refund as $5282. I guess the difference is what prevented the bond purchase; I’m not sure where the difference came from. I’m assuming I’ll get a letter explaining it. This is the first time in many years that I’ve had a refund ($782 before adding the $4500 extension payment) so maybe I did something wrong.
MFRP says
Just checked the IRS refund status page, it says:
You requested that part or all of your refund be used for a US Savings Bond(s) purchase. However, we could not honor your request for the savings bond purchase due to one or more of the following reasons:
The bond amount you claimed was not in a multiple of $50 or it exceeded $5,000.
You owed a past due obligation to which we applied part or all of your refund.
No idea how I had a past due obligation. I didn’t have one from the previous year, never received any sort of notice regarding such, and this year I already had a refund pre-bond-games and had made my estimated payments on time. I must be missing something.
Tom P says
MFRP, you can make as many estimated payments as you want, which would have alleviated the need to file an extension. I’ve done this several times in the past when I made a 401k withdrawal late in the year and then made an extra 1040ES payment in January to cover the taxes. Sorry you bond purchase didn’t work out as expected.
SteveR says
Using TT, had the same issue as several folks posted above, with feds refusing to issue $5K iBond I requested in Form 8888. IRS web page for my refund gave same reasons as MFRP’s.
Akin to some others, total refund was larger than $5K; TT rounded my refund up to nearest dollar; but IRS calculated refund 5 cents less than that. Would have liked $5K of the refund in iBonds, but pursuing further this year doesn’t seem worth the time and would likely be fruitless anyway.
My Question: If I receive a CP24 and it has no new info, can I just file it away and continue just to move on? Under what circumstances should a CP24 alarm me enough to follow up with phone calls, hiring an accountant, etc?
Thx much.
Old mariner says
Okay, here are my thoughts. Your CP24 was just to inform you that there was a discrepancy between what you claimed on your return and what the IRS had in its records. In your case $0.05. (Here’s where I’d insert a “shaking my head” GIF). No response is needed unless you want to dispute the $0.05. A dispute won’t help with the i-bond purchase. Once the IRS refunds you, there’s no recourse with respect to the i-bonds.
One reason why some people aren’t getting bonds seems to be due to estimated payments which include cents (i.e., are not rounded). Did you happen to make estimated payments of any sort during the year that included cents? It seems the IRS accepts payments with cents, but then all tax software rounds numbers (because that’s what the IRS prefers) which then results in very small discrepancies like yours that reduce a refund. An IRS reduction of a refund is one of the reasons the IRS gives as to why they might deny the issuance of i-bonds.
Tom P says
FWIW, I don’t let TT manipulate any of my inputs, I ALWAYS round my inputs before typing them into TT, and I don’t let TT try to “amaze me” by pulling data from any of my accounts either… I just type it in myself, and I double and triple check everything. I must be doing something right because I’ve never received a correction from the IRS and my spreadsheet calcs always agree with TT.
I don’t comprehend how a refund could be reduced by 5 cents as I thought all inputs got rounded (but maybe not estimated taxes based on some posts in this thread, which may explain some of this mess)
IMO, anyone that makes (or has 3rd parties make) estimated quarterly taxes in anything other than whole dollars needs to rethink their philosophy. After all, it’s ESTIMATED, so what do submitting payments in cents have to do with the final calculations?
SteveR says
Thanks for the responses, which give me some additional comfort that I can put this issue behind me, at least for now. You are also correct that I did make an estimated tax payment in 2021 that included some cents, which I’ll try not to repeat. Of course, if I get a CP24, I’ll review it carefully. Best regards, SteveR
Harry Sit says
I added a new section “Pay In Whole Dollars” to warn people of this issue with cents in estimated tax and extension payments.
MFRP says
Yeah, each of my estimated payments included cents. I just never thought anything of it, or considered that it might cause any sort of issue. Unfortunately I already made a Q1 2022 estimated payment that included cents. Guess I’ll make the remaining 3 in whole dollars only and try to pay attention to H&R rounding vs the actual estimated payment when I do my taxes next year. In my case, though, the difference between my refund and what H&R calculated was $26, which isn’t explained by rounding errors. I’m super careful, manual entries, and check everything repeatedly as well, so hopefully I’ll figure out what happened.
Harry Sit says
If you already made a payment with xxx.37, make your next payment xxx.63 so your total estimated tax payments add up to whole dollars. Then you continue the rest in whole dollars.
Old mariner says
@MFRP, there was another poster in this thread who had a $30-something discrepancy. It turned out that the IRS calculated penalty interest for an underpayment of estimated taxes. The total of all the poster’s estimated payments was more than sufficient, but apparently at least one quarter’s worth was not. I seem to recall the poster had a big income stream in the last quarter.
If you had uneven income during the year, maybe you incurred an underpayment penalty.
Jason Boxman says
For anyone coming to this in the future, I confirmed that at least for 2021 taxes it was not possible to get a refund in i Series Savings Bonds when filing with Cash App Taxes (former Credit Karma), which is free for federal and state for all income levels. As someone with relatively simple taxes, paying Turbo Tax or H&R to file just to get an extra $5k in Savings Bonds didn’t seem to makes sense for me. Maybe next year.
Old mariner says
Well, strictly speaking, that software does claim to support form 8888, which is used to order the i-bonds.
“What forms and situations does Cash App Taxes support?
•8888 Direct Deposit of Refund”
Did you fill out that form and not receive your bonds? If so, read some of the comments above about estimated taxes including cents as a possible cause. Or did the software not offer you the opportunity to fill out that form?
Jason Boxman says
Then this changed since February when I filed, but I’d asked explicitly if they support i Series Savings Bonds on form 8888, and I was told they do not support that method, and it was not present when I filed at that time. (It was in the FAQ at the time as well.) If that’s changed, that’s great news.
Old mariner says
I only know their website today (5/1/22) states that they support that form. It’s a standard form that’s needed for other purposes, too. In any event, you should be able to use that software next year, and that is the form you’ll want to be looking for if you want to purchase the paper bonds. If you do estimated taxes, pay them with whole dollars (round up so there’s no cents).
Harry Sit says
For simple taxes, OnLine Taxes (olt.com) supports buying I Bonds with the tax refund. It costs only $10 for both federal and state.
Tom P says
That decision not to pay TurboTax or H&R seems a bit short-sighted to me. My cost for TurboTax with a $10 discount was $29 plus my local tax. For a $5K bond you would have gotten $30 in interest the first month at the 7.12% rate. Personally, I like using TT online because it’s always up to date and it remembers what I did the previous year which makes it easier to use for me.
Pete says
I purchased the 10K limit for 2021 but didn’t know that I could buy another 5K with my tax refund until after I’d submitted my 2021 return (paper format). I submitted direct deposit information for my bank account but didn’t provide form 8888 to direct 5K of my return into series I bonds.
Is there a way to update or modify the direct deposit instructions to IRS (i.e., by filing an extension or a separate form 8888) so as to take advantage of refund 5K bonds? I understand that you can’t use an amended return to accomplish this. Still, there must be a way to revise the direct deposit, in case someone moves or closes their designated account, subsequent to filing.
Do you have any insights on this issue. With Series I now commanding 9.62%, I bet there are many people wishing they’d filed for bond purchases with their returns!
Harry Sit says
You can try e-filing the same return (plus Form 8888). It’ll probably get processed before your paper return.
Old mariner says
Unfortunately, form 8888 needed to be submitted with your return. There’s no way for you to order paper bonds after-the-fact. However, if you take a look at Harry’s most recent post: “How to Buy I Bonds (Series I Savings Bonds): Soup to Nuts” at https://thefinancebuff.com/how-to-buy-i-bonds.html, you’ll see there are a few ways you might be able to purchase more bonds this year. For instance, if you have a spouse, Trust, children, or business.
Dunmovin says
Harry, I overpaid my taxes so that i can get paper ibonds for the grandkids…filed paper return in early February (have a receipt of return received in Ogden on 2/14)…and nothing received (yet). Now I see 4% interest for late payment by the feds…so what does that get me….starting 45 days after filing deadline (approx. June 3 this year) starts the interest to run. Does that mess up my request via 8888 for $5k in refunds via paper Ibonds since it isn’t (now) a round number? I do not have any refund going to any checking, bank account, etc. The other funds I “rollover” for next year’s taxes. No cash back to me.
Harry Sit says
As you have seen reports from others, you may get I Bonds or you may not. You give it your best shot. Whether you actually get I Bonds is up to the IRS. Just wait to see what happens.
Dunmovin says
Then…all, overpay taxes when rates are low, file by paper close to tax deadline, etc. IRS will process e-filing first while paying interest on refunds (45 days after due date)…ergo don’t e-file. Buy ibonds following year by tax refund. Since Treasury/IRS does not have interest charged to their budget they have no incentive to minimize interest paid on late refunds!
Patsy T says
I received a single paper bond in the mail today in the amount of $5000 dated for May 2022 after efiling on April 28. I received the balance overpaid into my bank ac 7 days prior.
I had filed for an extension with freetaxusa in early April over paying $5928 then on April 28th copied the info into the IRS web site free fillable forms which was a little difficult because I couldn’t find where freetaxusa had placed a $10 difference. When I finally found it and changed the free fillable form I assumed it would have automatically changed the amount on form 8888 to match but it did not nor did it give me an error message that form 8888 total refund did not match the tax return amount, as required. luckily I had a personal info error that caused the return to be rejected allowing me to correct the 8888 form to match the IRS tax info and resubmit.
I also created three revocable trusts with 10k each and purchased 10k for my husband and myself.
Very happy it all went smoothly.
Thank you Harry for this site and your interest in helping others.
Roy says
Did you get a separate EIN for each Revocable Living Trust?
Patsy T says
No, I used my husbands ss# for our joint trust and used our own ss# for each of our personal individual name trusts
Roy says
Interesting. Please do let us know if the IRS every “dings” you for buying more than the annual limit for a given SSN. I don’t really know if the limit is just based on SSN, or is influenced by the fact that you have more than one entity using that same SSN. Would be good to know!
Tom P says
Buying bonds with for a trust using the same SSN as a personal account is fine.
Donald says
It seems that one gets “dinged” immediately if trying to buy more than $10,000 for one entity (other than a gift). A couple of weeks ago, my wife made a mistake, and got a message, saying she already had the max, and they would return the additional $10,000 in 8 – 10 weeks. Meanwhile the disallowed extra $10K is still in her account, and I guess we’ll see if and when they return it, and if they pay interest for the time they had her money.
Dunmovin says
Checking to see if any paper tax filers have received their paper Ibonds? I filed in February, have a receipt by IRS in Ogden Ut in February…but nothing.
Roy says
Has the IRS processed your return yet? Receipt does not equal processed.
Dunmovin says
Not to my knowledge…nothing available on irs website. My Q is aimed at those that filed a paper return…thanks, but I sense that is not u.
Mike says
Dunmovin, I paper filed about 12 weeks ago (see my comments at #75 and 99.) Today, I tried “Check My Refund” on the IRS website, using my total refund (>$5,000), the actual refund check amount, and both of these with the cents and without; all to no avail. They professed having no information for me. I also tried on 800-829-1040, went down the rabbit hole of options, ending with high call volume message followed by “click.” BTW, are they asking for the total refund (I-bonds included), or just the check amount I’m expecting?
Harry Sit says
Use the total refund amount (including I Bonds) on the Where’s My Refund site.
Dunmovin says
I had over $5k balance from the past and rolled the small amount over $5k for next year taxes with $5k going this year for ibonds. I had gotten no info on irs website on return…I suspect it is geared only for efilers. You confirmed, so far, that seems to be true.
Anyone else???
PT says
I mailed in my paper ibonds to be converted to electronic and got this email yesterday June17th so they are way behind.
Dear Customer,
This is a system generated email to communicate we received your Savings Bonds/Treasury Marketable Securities materials.
Cases are worked in the order they are received in our office. Your request is important to us and will receive attention as soon as possible. Please allow up to 13 weeks for review and processing. If we require additional information, we will contact you. Thank you for your patience.
Please retain the Customer Number and Case Number referenced above to streamline any future actions associated with this request. Also note, you may receive multiple email notifications and Case Numbers depending on the type of transaction(s) you have requested.
If you have additional questions, please use the Contact Us link on TreasuryDirect.gov.
We appreciate your interest in U.S. Treasury securities.
Sincerely,
Treasury Services
Mike says
PT: Regarding conversion of paper bonds to electronic registration on Treasury Direct.
I mailed several EE Bonds, together with my printed manifest to a treasury office in Minnesota on April 1st, got a “delivered” notice on April 4th, and was pleasantly surprised to see they showed up in my converted bonds account on April 30th.
Still no word on the I Bond I’m attempting to purchase with the IRS tax refund.
Dunmovin says
No change here, Mike. They apparently have no incentive to process since interest is accruing now but it does not come out of their budget. Be interested in seeing how the interest is credited. Then again, IRS/TD will/may find a way to send a check or send to a financial account….with no Ibonds issued!!!
Billybob Covman says
Just a datapoint for anyone: I am an overseas taxpayer. Without reading the comments, I made an estimated payment on 14 May for $5432.10. I always punch in random numbers just to break things. I filed my taxes on 30 May, and they were accepted the same day.
The IRS „where is my refund“ page stopper tracking a week ago, but yesterday it said approved (second bar). My transaction history on the IRS shows a split payment of 432 and 5000 in bonds. Today, $432.10 showed up in my US bank account, so I guess $5000 will be coming in bonds soon.
Short story: making an overpayment with cents (likely) worked for me. I even received the $0.10 back as well 🙂
Hope this helps someone.
Robert Farrell says
I received an IRS refund for 2021 via direct deposit in April 2022 in the amount of $4,500. I did not realize at the time I could buy up to $5,000 in I bonds with my refund. Even though it is now June 2022, can I still buy up to $4,500 in I bonds for my 2021 refund of $4,500 or has that ship sailed? I already purchased my allowable $10,000 for the year. Please advise.
Harry Sit says
Already sailed. Try next year.
Tom P says
Yep, as Harry said, “it’s on the seas.” But if you have a spouse or significant other either you or they could buy a gift bond up to $10,000 and keep it in your gift box for delivery in January 2023 or any date after that in the future. I did that for both myself and my wife as I wanted to take advantage of the current high interest rates.
Robert Farrell says
Tom P-If I buy a gift bond and hold until January 2023, does that count against my 2023 purchase for both my wife and myself?
Tom P says
Yes, Robert, a gift bond purchased now and kept in your “gift box” counts in the year it is delivered. So, if you purchase gift bond(s) now for delivery in 2023 they will count towards your 2023 quota. However, you could buy gift bond(s) now and hold them for as long as you want, and they will earn interest and keep marching towards maturity. If interest rates are still “good” in 2023 you could decide to purchase additional bonds and keep the gifts in the gift box until 2024, or you could split the purchases with a $5,000 gift bond now for delivery in 2023 and another $5,000 normal purchase in 2023. The options are endless. If you haven’t previously purchased gift bonds you should read Harry’s article. It’s easy, you just need to create an added registration and check the “gift” box checkbox.
Roy says
“Tom P-If I buy a gift bond and hold until January 2023, does that count against my 2023 purchase for both my wife and myself?”
There is some confusion here. The gift I-bond counts towards the annual I-bond purchase limit of the receiver in the year in which the bond is delivered. If you buy a gift I-bond for your wife now, and then deliver it in January 2023, the value of that I-bond will count towards your wife’s annual I-bond purchase limit for calendar year 2023. Purchasing a gift I-bond for someone else never counts at all against the annual I-bond purchase limit for the giver. So, the statement “if you purchase gift bond(s) now for delivery in 2023 they will count towards your 2023 quota.” is incorrect – gifted I-bonds will never count against your annual I-bond purchase limit, they will only count against the annual purchase limit of the receiver.
Tom P says
Roy is correct. I omitted one key word, “spouse.” I should have said, ‘… they will count towards your SPOUSE’s 2023 quota.” You can’t purchase gifts for yourself, only for someone else.
visitor says
Thanks for this helpful article!
If you have two TreasuryDirect accounts (Individual and Trust), can you overpay your taxes by $10,000 and have the I-Bonds split between those two accounts with the individual tax returns?
If you think you might owe taxes, can you overpay (say $6000 instead of $5000)? Will the IRS deduct what you owe and use remainder to purchase I-Bonds?
Harry Sit says
You’ll get paper bonds. The maximum is $5,000 per tax return. It doesn’t matter how many TreasuryDirect accounts you have. The $5,000 is from your refund. If you owe $1,000 before paying, you’ll have to pay at least $6,000 to turn the negative $1,000 into a $5,000 refund.
visitor says
Thank you, Harry Sit.
Mike says
Just to clarify per your second paragraph, “visitor”, if you overpay, the entire amount that exceeds what tax you owe will show up on the appropriate Form 1040 line: “amount you want refunded.” If you want some amount (up to $5,000), going to purchase an I Bond, you need to file Form 8888 and specify exactly how your refund is divided.
visitor says
Thank you, Mike.
Bobb says
I have face value of about $6,000 in paper-hard copy Series EE bonds that are paying an average 1% annually. I could wait out the 20 years (In 2029) and ensure they double but I don’t see the financial sense in that. My question is, can I cash those Series EE bonds in now in 2022 and take the principal and interest and purchase Series I bonds and not have to pay the roughly $600 of interest these bonds have made in totality in the last 12-13 years in calendar year 2022? I guess I am asking can I rollover bonds from Series EE to Series I without being taxed on the interest they have accrued over the years.
Harry Sit says
EE Bonds were issued at 50% of the face value. If you wait another 7 years, your $3,000 original principal plus $600 interest will turn into $6,000 in 2029. That’s a 7.6% annual return in the next seven years. While you didn’t earn much in the last 12-13 years, waiting for them to double is still probably your best option at this time. You can’t roll over from Series EE to Series I without being taxed on the accrued interest unless you happen to have qualified higher education expenses in the same year.
Dunmovin says
Update from previous post on paying/filing paper 1040 with 8888…Return received by IRS in February…received a check today for the full $5000 that was to go to ibonds! And with (stated in corner of check) $50.81 as interest (probably taxable!). Bottomline, do it right and do not get paper bonds. As Harry, said before we apparently have no recourse!!! Sorry, grandkids … no santa claus/ibonds this year.
Old mariner says
That’s a disappointing finale. Did you get a CP24 stating why you didn’t get the bonds?
I didn’t know until I read this blog back in January how persnickety this IRS paper bond thing is.
Tom P says
Well, it seems like you have only yourself to blame for this mess because you did not file electronically. If you had, you would have gotten your bonds in February just like I did. I’ve been filing electronically via Turbo Tax for many years without a single issue. To each his own, I guess.
Old mariner says
E-filing probably would have resulted in a faster response from the IRS, but he still might not have gotten bonds. Might be worth his time to ask the IRS why. Some of the taxpayers above contacted the IRS and discovered the obscure reason why the bonds weren’t issue in their case.
Dunmovin says
Old…No CP24 since everything was right…the problem in my view is the IRS drags its feet where it is beyond the June date for interest to start to accrue and ergo the amount of the refund is grown to over $5000 b/c of the interest….too much for ibonds! I won’t file anything electronically especially since I got the stimulus checks to a bank account that was ONLY used by me to receive foreign wire transfers of fees to me…my “wonderful” bank had to have filed a SAR with Treasury. Yet the tax refund was by check…go figure!
Dunmovin says
Tom, no guessing. Good testament to our IRS. No harm, no foul here. We get what we pay for. No efiling here. If the IRS paid interest out of their budget…guess who would be first in line?
Dunmovin says
Some of the posters seem to think that the IRS gets a free pass. When I went to school the parties are to suppose to deal in good faith. The IRS does not know how to deal in good faith. The Treasury fraudulently represents how to get paper bonds…there is no disclosure of the gothas and the public is not at fault.
In the case at hand Treasury could have rolled over the interest as if it was for next year’s taxes…which there was already a few bucks in my account for 2022…no, it went to great lengths to screw the public by taking away their right to purchase ibond…fraud…clear and simple!
Tom P says
Dunmovin, I think before you accuse the IRS of intentional fraud you should dig into the statutes, regulations, and procedures they are supposed to follow and figure out why your case turned out the way it did. In your case it may be as simple as the total of your refund plus the accrued interest was more than the allowed bond purchase, so the purchase was cancelled per procedures when run through the system. I seriously doubt someone at the IRS decided on their own to screw you out of buying bonds; it was all done by a computer program once the information from your paper return was entered into the system.
Why people still file paper returns today is beyond me; you are just asking for trouble since all your information must be manually entered into the system and doing that has a much higher chance of being done incorrectly by an overworked IRS employee than entering it yourself via e-file, which is then double checked by the e-file system you use.
Mike says
No progress update: I paper filed late in March after overpaying via Form 4868. No refund, no bonds as yet. When I got a human from the IRS on the phone the other day, I was told my return must be in the system somewhere, but there is no way to access it. Please wait 16 weeks before checking back.
Mike says
Update: After paper filing with electronic overpayment via Form 4868 in late March, still no progress. The IRS human being I got on the phone last week said my return must be in the system, but there is no way of locating it. Please call back in 16 weeks.
Old mariner says
Lol, I guess they’re being told to say weeks instead of months. 16 weeks somehow sounds sweeter than 4 months.
Jen says
Hi, thank you for the helpful article. Hoping you can help me figure out if I can buy for 2021 taxes. I filed an extension in April with my estimated payment (no overpayment since i didnt know about this). I have not filed the 2021 taxes yet. Can I use irs direct pay to make the $5k overpayment now and then, when I finally file the taxes, request the I bonds for the refund? Thanks.
Harry Sit says
“Extension” is no longer a choice in the “Reson for Payment” dropdown because the deadline already passed. “Balance Due” is still a choice. It might work but I’m not positive.
Tom P says
If Direct Pay won’t work, couldn’t you use EFTPS to make an extra $5000 payment before you file your taxes?
Harry Sit says
Whether you can still have the payment apply to 2021 is the question.
Dunmovin says
Harry, any suggestion on how to get paper ibonds as a result of paper filing in 2023? Specifically, for those inclined to paper file 1040/8888 and knowing irs must process return before $s go TD for ibond purchases, the fact that irs credits it’s late interest payment to refund that sets off the wrong numbers and ergo …only a cash refund check and no bonds. Sooooo, let’s assume over payment of $5.5k in taxes (any excess being used for 2024…) that the late interest that could be paid by irs in this hypo is $97 (odd number) for 2023 paper return…can one plan on buying, eg $4800 in paper ibonds (out of that $5.5k)…is that what one should do on forms? Of course even efiling of returns could have same problem if irs is late in processing it. Any suggestions on numbers and location on forms when there is a late interest payment by irs? Thanks
Harry Sit says
If you want I Bonds, don’t paper file. You have a much higher chance of getting I Bonds when you e-file. It’s still not guaranteed but you are more likely to be disappointed when you paper file.
Old mariner says
Did the IRS tell you the reason you didn’t get i-bonds was due to the interest credit?
Dunmovin says
In effect they did by refunding more than one can use for ibond purchase…see above. Thus, the reason for my suggested approach in Reply #133
Dunmovin says
Harry, you are right but that is not the lesser of…. Once more, care to venture “how to do it,” rather than another, and the e option can create a problem!! Thanks
Abe says
Will payment via the extension methodology help avoid underpayment of estimated taxes or otherwise count towards safe harbor withholding? Assuming no, but great if it does. Would save me time from calculating my withholding amounts towards the end of the year.
Harry Sit says
No, because the deadline for estimated taxes already passed when you pay with an extension.
Dunmovin says
Have taxes withheld from IRA distribution…treated as done evenly over year. I have RMD in December and have taxes withheld then on my anticipated taxes
tom says
my 2021 calendar year 1040 is under extension. in april 2022 paid in the amount i thought i needed to cover tax liability + a couple of thousand dollars as an “entension”
payment. my return now shows a bit over a 2,000 overpayment. i would like to buy 5,000 in ibonds. I pay estimated and extension payments via EFTPS. key question – can I now submit an additional payment thru EFTPS for 2021 (and classify it as for example “payment with return”) to get my total 2021 overpayment above 5,000 so i can claim 5,000 for ibonds on Form 8888 and the rest as a refund?
Mike says
Finally, resolution on my bond purchase (but not the kind I wanted.)
At the end of August, five months after paper filing, I got a check in the mail for $5,0xx.xx. No bonds, although I had requested $5,000 on form 8888.
The IRS explanation:
Not in multiples of $50 (not true), or
Exceeds $5,000, (also not true), or
You owed past due obligations which we applied (have never seen a notice of that.)
BTW, they did tack a little extra on the refund check, which amounted to about 3% interest.
Dunmovin says
As I posted earlier…the interest kicker made the total not divisible by $50. If interest posted as a credit toward next year’s taxes…paper bonds would have been issued . Called non-customer service and grandkids got stiffed
Old mariner says
If that’s what customer service told you, then that’s their story. I mean, an interest credit would increase the total amount of your refund. The form 8888 reasons listed for not issuing bonds seem to relate to decreases in the total refund. Maybe the interest credit is considered an “offset”. I dunno.
Also, it isn’t the total refund (including the interest credit) that has to be divisible by 50, it’s the amount that you designated for the bonds that has to be divisible by 50.
It’s as though the IRS is completely pi__ed off that they even have to perform this service, so they are making it as tortuous as possible just because it’s fun to crush people out of bonds.
S says
Any idea how long from when tax return is filed until the bonds are issued (don’t care about received)?
I’d want to make sure I’d lock in the 9.62%.
Harry Sit says
I e-filed on March 15 and I got the bonds with a March issuing date. There’s a chance you’ll catch the 9.62% rate if you e-file now and there are no problems with your return but everything has to work perfectly. You only do what you can and hope for the best.
Roy says
My experience was like Harry’s. I e-filed on April 7 and received bonds with an April issue date. I think it is key to make sure the math is correct in your return and to include the properly filled out form asking for the i-bonds. Be sure to e-file your return – any fee you may pay for e-filing will be more than offset by the great interest rate you will get if your bonds are issued in October. There are so many stories of late issuance and no-issuance for various reasons associated with paper filing.
C says
What are your thoughts on purchasing I Bonds with the 2022 tax return? I’m wondering if I should withhold extra federal taxes to make that purchase. Do you have any predictions on what the interest rates will be next May?
Harry Sit says
It’s too far out to predict, which isn’t necessary anyway. You can wait until April to decide and make a payment with an automatic extension, as shown in this post.
Jeff says
I pay estimated taxes. Last year I knew I wanted to buy a $5,000 I Bond with my tax refund (I already bought my $10k max), so I overpaid my 4th estimated tax payment enough to have the needed refund. This year I’m not sure if I want to do it again. I’d like to see how things look in April. Can I make an EXTRA estimated tax payment, after the 4th payment is made, but before I file my taxes. My 4 regular estimated tax payments will be enough to cover my tax obligation. The extra payment would be just to increase my refund enough to buy an I Bond.
Thanks,
Jeff
Tom P says
Jeff, if you use EFTPS you can easily schedule as many ES1040 payments as you want. I made an extra one November 1st to cover a withdrawal I made, and I have two scheduled for January 17th. I’m not sure I’d wait until April to make an extra payment to cover a bond purchase as you want to be sure it gets credited before you file your taxes.
Harry Sit says
The option to pay estimated tax for the previous year will disappear after Jan. 15. You can still make a payment with the automatic extension up to April 15. This post shows how to do it via Direct Pay. You can do the same with EFTPS. As Tom said above, allow some time between making the payment and filing the tax return to make sure your payment is properly credited before your tax return is processed.
Mike says
Great article. It is rare to see a financial topic article that isn’t mostly fluff and filler.. but the finance buff just brings the specifics, high value and expertise.
I pay estimated quarterly taxes and my last payment for 2022 is 1/17/2023. this appears to be the easiest method of sending overage funds.
That said, most of us do not know our actual tax / refund status till late February at the earliest and really much closer to the deadline depending on when we get them done.
For clarity, can I combine both the quarterly estimated taxes with the one time payment extension method?
In other words, I would make my normal quarterly estimated tax payments without any extra amount and then just do my overage using the extension method in say March to allow for sufficient time for the payment to be credited for the 2022 tax season and then file in mid April.
Mike says
Mike, what you’re proposing to do should work as it did for me last year, using Form 4868 (file for extension.) See my post above on March 23. My payment was successfully made using IRS Direct Pay, but the rest of the story is not so good. After several unsuccessful contacts with the IRS to track my case, my entire $5,000 was returned in August. (See my post above on Sept. 19.) Against the good advice of several gurus on this string, I paper filed as I have always done, and that is likely what caused my bond purchase to fail. I hope you have better luck than I did!
Dunmovin says
IRS would rather pay interest on your refund (different budget accounts) when you request paper bonds by paper filing of return ,ie grandkids get …. Do not paper file if you want paper bonds. Ironic part is irs has a colleague bank accounts in their system due to SARS being filed for receiving overseas wired funds!
Dougie says
For 2021, I filed an extension about April 10 last year and paid about $5500. I e-filed my return on about April 25 using TurboTax and my refund was about $5150. I elected to apply $150 towards 2022 income tax and $5,000 refunded as a paper I bond which was received by late May. I am definitely doing another extension for 2022. However, for this year I cannot file for an extension until I get a Schedule K1 from my deceased mother’s Trust that unfortunately had a first tax year that ended on 12-31-22 (estates and trusts can, and often do, have a different tax year). Assuming I get the Schedule K1 no later than by April 14, I would than have just a few days to file an extension with an accurate estimated tax payment that includes an extra $5000 to preserve the option to get another $5000 paper I bond at the new interest rate effective May 1.
Roy says
Yeah, that sucks. It could be even worse. The due date for your mother’s calendar year trust to file form 1041 and associated schedules K1 is April 18, 2023. But the trust can choose to file form 7004 to be granted an automatic 5.5 month extension of time to file.
You might try contacting the trust’s trustee to get an idea when they actually plan to file, and maybe that knowledge would help you in your planning.
Dan A. says
Ask the trustee what the K1 amount will be. Trustee probably has the return completed, but the forms are still in “draft” form, which is why they can’t be mailed yet.
Paul says
Is there anything special you need to do in Turbo Tax to indicate that you are filing as an extension?
Harry Sit says
You’re not filing “as an extension.” You do indicate how much you paid with an extension as shown in the “Report Payment on Your Tax Return” section.