Page 60 - 2020 Publication 17

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
when the interest has accrued but hasn't been tween 1980 and 2004. They mature 20 years date and not previously reported for all your
paid, the transaction is described as trading a after issue. Series HH bonds that have not ma- bonds.
bond flat. The defaulted or unpaid interest isn't tured pay interest twice a year by direct deposit Once you choose to report the interest each
income and isn't taxable as interest if paid later. to your bank account. If you are a cash method year, you must continue to do so for all Series
When you receive a payment of that interest, it taxpayer, you must report this interest as in- EE, Series E, and Series I bonds you own and
is a return of capital that reduces the remaining come in the year you receive it. for any you get later, unless you request per-
cost basis of your bond. Interest that accrues Series H bonds were issued before 1980. All mission to change, as explained next.
after the date of purchase, however, is taxable Series H bonds have matured and are no lon-
interest income for the year it is received or ac- ger earning interest. In addition to the twice-a- Change from method 2. To change from
crued. See Bonds Sold Between Interest Dates, year interest payments, most H/HH bonds also method 2 to method 1, you must request per-
later, for more information. have a deferred interest component. The re- mission from the IRS. Permission for the
Below-market loans. In general, a below-mar- porting of this as income is addressed later in change is automatically granted if you send the
IRS a statement that meets all the following re-
ket loan is a loan on which no interest is this chapter. quirements.
charged or on which interest is charged at a Series EE and Series I bonds. Interest on
rate below the applicable federal rate. If you are these bonds is payable when you redeem the 1. You have typed or printed the following
the lender of a below-market loan, you may bonds. The difference between the purchase number at the top: “131.”
have additional interest income. See Be- price and the redemption value is taxable inter- 2. It includes your name and social security
low-Market Loans in chapter 1 of Pub. 550 for est. number under “131.”
more information.
Series E and EE bonds. Series E bonds 3. It includes the year of change (both the
U.S. Savings Bonds were issued before 1980. All Series E bonds beginning and ending dates).
have matured and are no longer earning inter-
est. Series EE bonds were first offered in Janu- 4. It identifies the savings bonds for which
This section provides tax information on U.S. ary 1980 and have a maturity period of 30 you are requesting this change.
savings bonds. It explains how to report the in- years; they were offered in paper (definitive) 5. It includes your agreement to:
terest income on these bonds and how to treat form until 2012. Paper Series EE and Series E
transfers of these bonds. bonds were issued at a discount and increase a. Report all interest on any bonds ac-
For other information on U.S. savings in value as they earn interest. Electronic quired during or after the year of
change when the interest is realized
bonds, write to: (book-entry) Series EE bonds were first offered upon disposition, redemption, or final
in 2003; they are issued at face value and in- maturity, whichever is earliest; and
For Series EE and I electronic savings crease in value as they earn interest. For all
bonds: Series E and Series EE bonds, the purchase b. Report all interest on the bonds ac-
Series EE and Series I price plus all accrued interest is payable to you quired before the year of change
Treasury Retail Securities Services at redemption. when the interest is realized upon dis-
P.O. Box 7015 position, redemption, or final maturity,
Minneapolis, MN 55480-7015 Series I bonds. Series I bonds were first of- whichever is earliest, with the excep-
fered in 1998. These are inflation-indexed tion of the interest reported in prior tax
For Series EE and I paper savings bonds: bonds issued at face value with a maturity pe- years.
Series EE and Series I riod of 30 years. Series I bonds increase in You must attach this statement to your tax
Treasury Retail Securities Services value as they earn interest. The face value plus return for the year of change, which you must
P.O. Box 214 all accrued interest is payable to you at redemp- file by the due date (including extensions).
Minneapolis, MN 55480-0214 tion. You can have an automatic extension of 6
Reporting options for cash method tax- months from the due date of your return for the
For Series HH and Series H savings payers. If you use the cash method of report- year of change (excluding extensions) to file the
bonds: ing income, you can report the interest on Ser- statement with an amended return. To get this
Series HH and Series H ies EE, Series E, and Series I bonds in either of extension, you must have filed your original re-
Treasury Retail Securities Services the following ways. turn for the year of the change by the due date
P.O. Box 2186 (including extensions).
Minneapolis, MN 55480-2186 1. Method 1. Postpone reporting the interest Instead of filing this statement, you can re-
until the earlier of the year you cash or dis- quest permission to change from method 2 to
pose of the bonds or the year they mature. method 1 by filing Form 3115, Application for
Or, on the Internet, visit (However, see Savings bonds traded, Change in Accounting Method. In that case, fol-
TreasuryDirect.gov/indiv/indiv.htm. later.) low the form instructions for an automatic
2. Method 2. Choose to report the increase change. No user fee is required.
Accrual method taxpayers. If you use an ac- in redemption value as interest each year. Co-owners. If a U.S. savings bond is issued in
crual method of accounting, you must report in- You must use the same method for all Series the names of co-owners, such as you and your
terest on U.S. savings bonds each year as it ac- EE, Series E, and Series I bonds you own. If child or you and your spouse, interest on the
crues. You can't postpone reporting interest you don't choose method 2 by reporting the in- bond is generally taxable to the co-owner who
until you receive it or until the bonds mature. crease in redemption value as interest each bought the bond.
Accrual methods of accounting are explained in year, you must use method 1.
chapter 1 under Accounting Methods. One co-owner's funds used. If you used
Cash method taxpayers. If you use the cash If you plan to cash your bonds in the your funds to buy the bond, you must pay the
same year you will pay for higher edu-
tax on the interest. This is true even if you let
method of accounting, as most individual tax- TIP cation expenses, you may want to use
payers do, you generally report the interest on method 1 because you may be able to exclude the other co-owner redeem the bond and keep
all the proceeds. Under these circumstances,
U.S. savings bonds when you receive it. The the interest from your income. To learn how,
cash method of accounting is explained in see Education Savings Bond Program, later. the co-owner who redeemed the bond will re-
ceive a Form 1099-INT at the time of redemp-
chapter 1 under Accounting Methods. But see
Reporting options for cash method taxpayers, Change from method 1. If you want to tion and must provide you with another Form
1099-INT showing the amount of interest from
later. change your method of reporting the interest the bond taxable to you. The co-owner who re-
Series H and HH bonds. These bonds were from method 1 to method 2, you can do so with- deemed the bond is a “nominee.” See Nominee
issued at face value in exchange for other sav- out permission from the IRS. In the year of distributions under How To Report Interest In-
ings bonds. Series HH bonds were issued be- change, you must report all interest accrued to come in chapter 1 of Pub. 550 for more
Page 56 Chapter 6 Interest Income