Starting in January 2011, you can buy U.S. Series I Savings Bonds with a portion or all of your tax refund for yourself or anyone. Issued by the Department of the Treasury, Series I bonds are low-risk bonds that grow in value for up to 30 years. While you own them they earn interest and protect you from inflation. Last year, the IRS received 22,520 tax returns requesting over 99,000 savings bonds totaling $11,190,200. Buying savings bonds with your tax refund is simple and easy Just tell your tax preparer you want to buy savings bonds with part or all of your refund! If you prepare your own return, file Form 8888, Allocation of Refund (Including Bond Purchases). The instructions explain what you need to do. In any single calendar year, you can purchase up to $5,000 of I bonds under this program. If you purchase bonds with your tax refund, the amount you request must be divisible by 50. If you don’t buy I bonds with 100 percent of your refund, you can elect to have the remaining amount not used to purchase bonds be deposited into a bank account or mailed to you as a check in the mail. For example, if your refund is $280; you can direct $250 to I bonds and the $30 balance to your savings account or request a check by mail. The choice is yours! Register Paper bonds in your name or someone else When you purchase savings bonds with your tax refund, you will receive paper bonds, issued in your name or the name you designate as primary owner, co-owner or beneficiary. If you are married and filed a joint return, the bonds will be issued in your and your spouse’s name. You can also designate a beneficiary or co-owner under this name registration option. Your request will be processed in two parts Part 1: Generally, you will receive the bonds after you receive the remainder of your tax refund from the IRS. The IRS will process the portion of your refund that you are not using to buy savings bonds. This amount will be deposited into the account you designate or sent to you in the form of a paper check in the mail. Go to Where’s My Refund? or call 1-800-829-1954 to see if Part 1 is complete. Part 2: The IRS will forward your request for savings bonds to the Treasury Retail Securities Site. It will take them up to three weeks send your bonds to you at the address on your tax return. You can call the Treasury Retail Securities Site at 1-800-245-2804 to check on the status of your bond issuance. More about savings bonds Series I bonds pay interest based on a combination of a fixed rate (currently 0.00%), which remains the same throughout the life of the savings bond, plus a semiannual inflation rate - currently 0.74%, which is updated each May and November. The interest earned by purchasing and holding savings bonds is subject to federal tax at the time the bonds are redeemed. However, interest earned on savings bonds is not taxable at the state or local level.
