The tax bill is coming due for one of the hottest investments of the past two years.

Millions of Americans rushed to buy I bonds in 2022 when a guaranteed 9.62% interest rate turned the staid government savings bonds into a bonanza. But after rates dropped in 2023, people cashed in $6.45 billion worth of I bonds—roughly 22 times the total redeemed the year before.

The average bond’s redemption value was $5,319.

For those who bought I bonds for the first time or just need a quick reminder, know this: All that interest income is taxable as regular income. If you cashed in, you need to report the interest on your tax return even if finding a 1099 for I bonds is more complicated than other investments.

“A form 1099 will NOT be mailed to you,” explains an email from the government’s clunky TreasuryDirect site. For I bonds, you have to log in to the site and navigate to the page where you can download the form.

“Because it’s digital, many people forget, and many of them will end up getting IRS notices,” said Miklos Ringbauer, a certified public accountant in Los Angeles.

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As for how much you’ll pay, it mostly matters how much you already make. For $1,000 of I bond interest, the tax bill would be $220 for a taxpayer in the 22% bracket.

There is a lot at stake for forgetting the form and failing to report the income. Leaving it off your tax return can lead to penalty and interest charges that can partially offset any interest income you got. How much depends on how quickly you report the missing income and pay any taxes due and whether you qualify for a penalty waiver.

Here’s how to avoid that predicament.

How do I download my 1099 on TreasuryDirect?
If you can’t find the email from the Treasury Department you may have received in January, search for the subject line: “TreasuryDirect 1099 Statement Information.”

Finding the form on the TreasuryDirect site is confusing enough that the Treasury Department created an instructional video to demonstrate step by step how to navigate there.

Once you’ve logged into your TreasuryDirect account, click on “Manage Direct” and then under “Manage my taxes,” select “Year 2023.” Then click on “View your 1099 for tax year 2023.” There is no print button, so print it directly from your browser window and save it as a PDF file. You can then upload that to commercial tax software or your tax preparer’s secure web portal.

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How much tax do I owe on my I bonds?
Interest on I bonds is exempt from state and local taxes but taxed at the federal level at ordinary income-tax rates. There is an option to pay taxes every year on the interest instead of waiting until you cash out, but that can be a bookkeeping headache, said Jeremy Keil, a certified financial planner in New Berlin, Wis., who just redeemed two $10,000 bonds in December that he bought in 2021 and 2022 and has $2,772 of interest to report on his 2023 tax return.

For most taxpayers, it is easier to defer the tax hit and pay upon the redemption, Keil said. Under certain circumstances, you can avoid taxes on the interest by using it to pay for higher education.

Can I withhold taxes on I bonds?
For future I bond cash outs, it is possible to withhold taxes, much the way taxes are withheld from your paycheck. On the TreasuryDirect website, click on “Manage Direct” and then “Update my personal information.” From there, you can set a voluntary default withholding rate up to 50%, which will be used on all future cash outs.

If you choose to withhold taxes, your 1099 will show what you earned in interest and the amount withheld for taxes.

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Check your IRS online account for all your other 1099s
For clients who don’t feel prepared or organized, Ringbauer sometimes has them request an extension to file their taxes and then check their Internal Revenue Service online accounts over the summer. Taxpayers can access their personal tax information online by setting up an IRS online account.

The wage and income statement will show all the 1099s issued to that taxpayer. That can include 1099s from gig jobs, cancellation of student-loan debt, or even bonuses for signing up for a crypto account.

“At the end of the day, the taxpayer is responsible to account for their income,” he said.

LINK: https://www.wsj.com/personal-f...ccb?mod=hp_lead_pos9

The tax paperwork for I Bonds is no harder than reporting any other interest...

Having to go to a website to get your 1099 isn't exclusive to TreasuryDirect. It's not uncommon for banks and brokerages nowadays require you to log in to access electronic versions of tax forms, statements, etc. Mailed paper documents are being phased out by a number of them, with electronic documents being either required or at least incentivized (via the waiving of certain fees if you agree to electronic correspondence).

You must have money all over the place. I am self employed and ALL my 1099s are mailed even the ones that are for a couple of bucks. I probably get 50 paper 1099s. Having to log in is a new one for me and frankly not welcome. Your average Joe is likely to miss reporting the interest.

quote:

Originally posted by ZSMICHAEL:
You must have money all over the place.

Not really. I use 2 banks and 1 brokerage. All 3 of those do electronic 1099s.

In fact, my mortgage company is the same way. You have to log into their site and download your 1098, rather than getting it in the mail.

My current employer even does electronic W2s too.

Yea I am with Rogue. Even with 1099's that are mailed it is easier to go to the website and download it. Plus it is quicker. Plus it means I can just attach it to the email I send to my tax guy. There is absolutely nothing hard about the tax paperwork unless you don't just don't do it. Every brokerage firm I have ever dealt with has barraged me with encouragements to go paperless. I used to fight that but I actually prefer it for the most part now.

Even my company has gone to electronic W2's. This (electronic 1099's) is nothing new and that article just have been written on a slow day. Theoretically it keeps the admin costs down which may or may not be passed along to us. Doubt it but it's possible. lol

I just tell my tax software to import my 1099s right into my return. I would have forgotten about those T-bills.

quote:

Even my company has gone to electronic W2's. This (electronic 1099's) is nothing new and that article just have been written on a slow day. Theoretically it keeps the admin costs down which may or may not be passed along to us. Doubt it but it's possible. lol

^^^^^^^^^^^^^^^^
It is not a problem when you deal with four or five. It becomes a BIG hassle when it is over 50 sources. My bank and brokerages are not an issue. Your world seems a little smaller than mine.lol

Very timely for us.

We jumped on the I Bond bandwagon, and then cashed out when interest rates dropped. I just spent an hour trying to log on to the site to get the 1099 and then got locked out. I have to call tomorrow to try and regain access.

I don't have a problem downloading the 1099 off a website (I had to do that with Schwab and other accounts). But, trying to get access to the antiquated Treasury Direct site and then trying to find things on it is a pain in the ass.

There is always this bullshit with government websites. I have been locked out for two weeks and every time I call they are too busy to reply.Myorkas must be handling the website.

It only took FOUR MONTHS to cash the paper I Bond my brother and I inherited from my parents. They had bought it in 2000 and it had a great base rate so when the inflation rate was 9% or whatever it was earning 13%. It was earning 7% when the US Treasury finally deposited it into my account.

I had heard the paper ones take forever to cash, I managed to call them last week for the first time to just check in and ironically they had sent funds the day before, I checked and sure enough it was there.

I'm sure the fact that it was inherited threw a wrench into things.

But normally, with paper I Bonds in your name, you can just cash it at your bank. Just fill out the back and take it to a teller, they run it through their system to determine the value, then they deposit it into your account. Money is available the next day. The bank then mails you a 1099 the next tax seasons.

quote:

Originally posted by RogueJSK:
I cash in paper I Bonds at my bank.

Just fill out the back and take it to a teller, they run it through their system to determine the value, then they deposit it into your account. Money is available the next day. The bank then mails you a 1099 the next tax seasons.

You can't cash inherited I Bonds that way unfortunately. They have to be mailed in to the Treasury. You can't roll over inherited paper I Bonds to unnamed beneficiaries either, otherwise we would have milked that interest for another 6 years. Not sure if we could have had mom convert it from paper to online before she passed, but we were acting as POA for the final several years and that probably would have been a headache.

Four months for them to cash it was baffling though. Also, mailing it in unsigned made me nervous as can be. I sent it via USPS with tracking.

A very timely post, and a coincidence for me! Just went through the frustration of trying to get my 1099 data for I-bonds redeemed this year. After more than an hour trying to navigate the treasurydirect.gov website I gave up completely.

Reporting the net interest actually received on the tax return, including it in my taxable interest. If they don't like it they can trash me if they wish.

The potential problem lies in reporting the total interest, then reporting the early withdrawal penalty on a separate line, which is what IRS expects. The net result is the same dollar amount, so I can't see how they could justify any penalty.

Maybe IRS has some whiz-kid who can figure out that they already have all the data anyway. By maybe I'm hoping for too much.

All my records are digitized now. If I get a hard copy, I scan it into a pdf.

Spent most of last week gathering 1099 and 1098s. Schwab didn’t have them until the 16th. Then I merged them all to one 180 page .pdf. Gotta run to my local postal annex and get it printed since I don’t own a printer. Then sort and deliver to my tax guy. Along with other non electronic docs receieved in mail last few weeks.

I told my several friends and my mom that I know traded I bonds they had to log in to treasury direct to get the .pdf.

What a pita.

I helped get my parents into IBonds a couple of years ago. Kind of wish I hadn't.
Dad just passed in January and I need to get his account transferred over to my mom. The website is a total PITA. Want to talk the process over with someone. Ha, estimated wait times are 2 hours.
I've been procrastinating because I really just don't feel like dealing with them right now.
Once I do, I'll be closing the whole thing down. Life is too short to be dealing with these type of heaedaches for a few more $ of interest.

One should be working(always) on keeping most under the IRA, 401k or similar umbrella. It makes for a MUCH easier tax season.

Although not intuitive, your 1099s from Treasury Direct should be one or two clicks away once you log in.

"Not intuitive" is a very mild way of describing the .gov website. More accurate would include cumbersome, difficult, incomprehensible.

I'm not a complete neophyte, having 40 years experience with computers including operating a business website daily for many years. Saving, transmitting, downloading, uploading, transferring, copying, and printing images and documents is a simple enough process for anyone. But a simple process means nothing on a website that a majority of users are unable to navigate sufficiently to locate the stupid 1099 documents in the first place.

I will report the actual interest received, which is easy enough. Two accounts, each with $10,000 investment, each cashed out after the one-year minimum with $10,649 deposited to my bank account. So, two X $649 reported on our joint return.

Simple enough to me, but probably not complicated enough for the folks who created treasurydirect.gov (we'll see). I will make the good faith attempt to comply with tax law; if .gov wants to nitpick the matter I'll just have to play their game.

Best regards.

quote:

Originally posted by LoboGunLeather:
"Not intuitive" is a very mild way of describing the .gov website. More accurate would include cumbersome, difficult, incomprehensible.

Oh yeah, it sucks.

More than a year ago, it was crazy to even log in.

When entering your password to log in, you used your mouse and click on a "virtual" keyboard on your screen to enter the password. It was absurd.