Do I pay taxes on Savings Bonds when they stopped earning interest or the year they were cashed? ?
by admin ~ May 1st, 2008 . Filed under: United States .
Adam N asked:
The bonds stopped paying any interest in 05, but sat in a draw. They were cashed in 07. I’ve seen a couple of notices that make the argument that I should pay in 05 (my preference).
Dave
The bonds stopped paying any interest in 05, but sat in a draw. They were cashed in 07. I’ve seen a couple of notices that make the argument that I should pay in 05 (my preference).
Dave
May 2nd, 2008 at 11:16 pm
On Savings Bonds, the tax becomes due when you cash them.
May 3rd, 2008 at 2:26 pm
In the year you earned the interest; not in the year you cashed the bonds.
May 5th, 2008 at 4:55 pm
Series E and EE and I Bonds are taxable at the earlier of the year the bonds are cashed or the year in which they mature. OR
taxpayer may elect to pay tax on yearly interest.
May 8th, 2008 at 6:28 am
File or amend your 2005 tax return and add the interest income. It should have been on that year’s return.
May 10th, 2008 at 1:08 pm
If they matured in 2005, that was the year.
To file:
In 2008, you list the interest on 1040 schedule B, then subtotal, then subtract out with a notation that the interest is reported on 2005.
For 2005, you amend and pay the tax. The IRS will bill you for the interest since 4/15/2006. You probably won’t be asked to pay a penalty.
May 12th, 2008 at 6:53 am
With Savings Bonds, you have the option of paying them each year as the interest is earned or whenever the bonds are cashed in.