Savings Bonds Redeemed

[Summit1]

Taxpayer received Savings Bonds from his deceased father. He got everything converted and redeemed through Treasury Direct. 

All the funds received were deposited in March 2023. The taxpayer received 1099-INT forms but they are (3) 2021, 2022, and 2023. Since the interest was not received until 2023, can I include all the 1099's on the 2023 return. 

All  the transactions on Treasury Direct are dated 2023. 

Thank you!

[BobKamman]

What year did the father die?  Has his final return been filed yet?  Did it report any of this interest income?

Are you saying that the 1099's show the year paid as 2021, 2022, and 2023?  The interest is taxable in the year the bonds stop accruing interest, but I haven't seen that enforced.  Maybe they are doing it now.  

[Summit1]

I will confirm father’s final return has been filed and if any interest was previously paid snd reported.

The (3) 1099’s total the amount of interest reported by Treasury Direct. 

[BobKamman]

But you're saying, Treasury issued a 2021 1099-INT in 2023?  That's progress.

[Summit1]

Yes….(3) separate 1099’s-one for each year 21, 22, & 23

[Summit1]

I thought answered the question regarding father’s death but I must not have posted.

Father died in 2020. Final return has been filed and no savings bond interest was reported. 

The son told me he left the funds because he didn’t need them. I am wondering if some of the bonds matured in 22 and 22. I have asked the son to see if he has a record of when the bonds matured.

[BobKamman]

What the son said was, "I didn't cash them even when they weren't collecting interest because I didn't need the money."

What you should have heard was, "I wanted to evade taxes for a while and I thought no one would notice."  

[Summit1]

I know this taxpayer and I think it would not be intentional. I think he just didn't understand. 

I am wondering if I need to amend 2021 and 2022 and report the 1099's that have those dates or just report all on the 2023 return since the money was not actually received by the taxpayer until March of 2023.

It seems like the IRS would have issued him letters indicating he didn't report that interest in 2021 or 2022 since they have been pretty active in checking 1099's.

Arnold

[BobKamman]

If you know him, you probably understand why he will blame anyone but himself for not knowing the nature of this inherited investment, then failing to mention them to you.  Ignorance is often difficult to acknowledge.  But why would you want to put 2021 and 2022 income on a 2023 return?  If it were any other kind of income, would you do that? And let's not blame IRS for not informing him until the bonds were cashed that there is taxable income to report in the year they matured.  The bonds weren't in his name, and they probably didn't have the father's SSN. 

You can tell him he should file amended returns.  Depending on the amount involved, you can mention that he might expect a CP-2000.  

[qbteachmt]

"But you're saying, Treasury issued a 2021 1099-INT in 2023?"

I read this as "received."

"Taxpayer received Savings Bonds from his deceased father."

The father dies in 2020.

"He got everything converted and redeemed through Treasury Direct."

Because three years later, he finally followed up? And up to that point, never checked the TD account to see these 1099s were available...I find it hard to believe they were freshly issued just now.

I sense amended returns in his future.

[Summit1]

The taxpayer brought me an envelope with the information he received from Treasury Direct. I got my first look at the 1099's that he printed of of Treasury Direct. 

2023 1099-INT was available on the website 01/03/23

2022 1099-INT was available on the website 08/01/22

2021 1099-INT was available on the website 09/21/21

I am thinking these are the dates the bonds matured. Taxpayer received the the funds and deposited it on April 7. I am a little surprised the IRS has not contacted him about the unreported interest in 21 and 22. 

I think the proper action is to amend the 21 and 22 return and file the 23 normally.

[BobKamman]

"2023 1099-INT was available on the website 01/03/23"

Really?

[Summit1]

My apologies...01/03/23 is the date of the (3) bonds that were redeemed. There were (3) bonds redeemed 08/01/22 and (1) bond redeemed on 09/29/21.

[BobKamman]

Sort of makes you wonder who was redeeming them, right?  Maybe there were other bonds that went to other kids.  Make sure the SSN on the 1099's is that of your client.  

[Summit1]

Taxpayer has a brother and they split the bonds. The (3) 1099's my taxpayer received have his SSN on them and his home address.

[qbteachmt]

"01/03/23 is the date of the (3) bonds that were redeemed. There were (3) bonds redeemed 08/01/22 and (1) bond redeemed on 09/29/21."

From TD: "By continuing to hold the bond, you can continue to postpone reporting the bond's accumulated interest for federal income tax purposes until you redeem it, you transfer the bond to another person, or the bond stops earning interest. When EE and I Bonds reach maturity, they are automatically redeemed and the interest earned is reported for federal income tax purposes."

If your taxpayer left everything in Dad's name until now (which would be an error), that doesn't relieve him from reporting the interest on those 1099-Int. We know it isn't the dead guy reporting that.

"Since the interest was not received until 2023, can I include all the 1099's on the 2023 return."

But your due diligence revealed annual earnings.

"The son told me he left the funds because he didn’t need them"

Now we know more facts. "All  the transactions on Treasury Direct are dated 2023" isn't the case.

[BobKamman]

"his" = your client, or the brother?

[Summit1]

I am asking the taxpayer when the bonds were transferred into his name. 

Maybe that will provide helpful information

Thank you