Your Tax Refund Introduction to I Bonds
February 15, 2010 by Mr. GoTo
Filed under Investing for Retirement, Taxes
Regular readers know that I am a fan of I-Bonds and TIPS for retirement savings. If you are at all concerned about future inflation (and you should be), you should own TIPS and/or I-Bonds as part of a diversified portfolio. This year, the federal government is making it easy for you to buy I-Bonds, also known as Series I U.S. Savings Bonds.
The new and easy I Bond purchase method comes from your federal income tax refund. (You were planning on investing that refund money, right? After all, you let the government use it interest free in 2009!)
This is how you claim the refund:
1. Decide how much of the refund you want to allocate toward the purchase of I-Bonds. Right now, there is an annual purchase limit of $5,000 per person using this method. The bonds purchased from a tax refund will be issued in paper form. You can purchase an additional $5,000 in electronic bonds but not using your tax refund.
2. Download or use IRS Form 8888. This is the form that tells the IRS that you want to direct your refund electronically to more than one account. I Bonds are sold in $50 increments, so unless your refund is an exact multiple of $50, you will have other refund money to account for.
3. Enter the amount of your I Bond purchase in line 1a of the form. Also enter the routing number (043736881) and account number “bonds.” Check the “Savings” box.
4. Enter information for direct deposit of the balance of your refund in line 1b.
After you receive the paper I Bonds, you may open a Treasury Direct account and have them converted to electronic form.
Here is the link to IRS Form 8888
Give this I Bond purchase plan some serious consideration. Five or ten years from now, you will be glad you did.
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