Tax records for I-Bonds

Financial Planning Tax Strategies
1

I bought a substantial amount of I-Bonds in 2001. (When they yielded 3% + inflation.) They mature in 2031. As allowed by the IRS, I did not pay income tax on the interest for many years with the erroneous understanding that I would be able to gradually cash them in after they mature.

In 2021, @aj485 advised me that all interest would become taxable when they mature – a large lump sum.

I started paying income tax on the I-Bonds in 2021. The IRS says that a 1099-R will be issued when the bonds mature (or are cashed in). Then tax will be due unless I can prove that the tax has been paid before then.

What is the best way to prove that tax was paid? I have included a spreadsheet listing the bonds by serial number and the tax paid to my 1040 tax return in 2021 and 2022. Plus I put a copy of the spreadsheet in my safe deposit box (along with the paper bonds).

Wendy

4 Likes
2

I started paying income tax on the I-Bonds in 2021. The IRS says that a 1099-R will be issued when the bonds mature (or are cashed in). Then tax will be due unless I can prove that the tax has been paid before then.

Wouldn’t whatever year’s 1040 you paid the previous taxes on show, “Yep, there ya go, I paid the taxes.”

1 Like
3

This is a snip from page 17 of IRS Pub 550 2022 Publication 550 (irs.gov) that tells you how to document the interest previously paid on Schedule B of your 2031 tax return.

image

I would continue to keep up the spreadsheet, since you will need to use the totals from the spreadsheet to populate the information on you will need to enter in step 2 of the snip.

I would also suggest keeping copies of the tax returns showing the interest paid.

AJ

6 Likes