Get your complimentary guide to go with this episode:
Tax Strategies for Retirement (Podcast)
By submitting your contact information, you consent to be contacted regarding retirement income strategies that utilize investments and insurance products.
Below is a transcription of the Ask Gregory Podcast 89: Can I Buy Extra I-bonds with Leftover Money from My Tax Returns?
Gregory Ricks 00:00
Hey, welcome. I’m your host Gregory Ricks a financial advisor here to answer your questions and help you win with your money.
Podcast Intro / Outro 00:09
On today’s episode of the Ask a great podcast, we had Jude Heath joining us from J. Heath and CO, where he joins Gregory to answer Richard’s question from the winning in life hotline. Can I buy extra eye bonds with leftover money from my tax returns? We also have a complimentary download waiting for you on this topic. If you go to gregoryricks.com/podcast89. Again, that is gregoryricks.com/podcast89.
Gregory Ricks 00:34
So let’s bring on Richard from Metairie. Welcome to winning at life. How can we help you today, Richard?
Yes, I’ve got a question about my tax refund. Snail nailed the return in March. And I haven’t heard anything yet. I’m just going to be automatically put into my checking account. But I know they’re super behind on opening up the returns physically, you know, on the physical mailing return. So I wanted to know two things is if it did, they owe me interest from the time that the tax was due to when they get around paying me that could be done until the end of the year, maybe to next year. And also a secondary question is I’ve recently I’ve heard that tax returns can be invested in I bonds. Now I already got my 10 grand this year max in the eye bond. But is there a maximum on tax returns? Say I’m getting hypothetical I get $20,000. Back? Can I put the whole 20,000 bonds?
Gregory Ricks 01:54
You want to speak to the tax question? I’ll handle the I bond part if you won’t.
Jude Heath 02:01
Sure. So, you right, Richard? Paper process returns are taking forever, by pre pandemic standards. And so you know, we’re having clients wait up to six, eight months to get their returns processed. So if you mailed it certified and you’ve got your registered number that they actually received it, then you can be assured that your refund will be processed and sent forward eventually, no, they’re not going to pay you interest back through April the 15th. Or whenever that was due. And so you’re just going to get your refund amount. And that’s just the that’s where we are now is that’s their labor. And we just have to wait. And so yeah, that’s that’s what’s going on. So Gregory with the ions.
Gregory Ricks 02:54
Yeah, and you’re getting a pretty good sized tax refund, I could see why you would ask that question. But here’s, and this is a great website. And they they’ve got all these questions, I think you could think of their treasury direct.gov paper or electronic both, can you how can you buy I bonds, you can buy and buy paper or electronic you can buy a paper I bond only when filing a federal income tax return. So that takes us to the next part, what’s the maximum electronic, you can put 10,000 Total each calendar year per person. And two I bonds paper the max $5,000 Total each calendar year per person and you’ve got a bonds that are in any amount to the penny from $25 to 10,000 papers 5100 200 515 100. The combined rate for AI bonds issued from May through of this year through October of 2022. The combined rate is 9.62%. So that is appealing but you can’t get a lot of money in there. Does that help you Richard?
Well, so you’re saying it since I already put my 10 grand and not to my tax returns. first of the year, I just got my account online and and I’m taking money out of my account the 10 grant. So what you’re saying is I’ve already done that the tax return. I can’t have anything going in there from the tax returns because the 10 Grand is maximum for whether you’re doing it through a tax return or if you’re just buying it directly on the website.
Gregory Ricks 04:48
Yeah, 10k is the max. It is okay. Are you right, Jude.
Jude Heath 04:54
So, so you Richard, if I’m understanding your question correctly, you’re asking if you can divert any of your refund to buy more i bonds.
Right? Right, in that I’ve already put 10 grand in for us at a year before I even file my tax. So will they take like, hypothetically, we’ll say, okay, and you get $20,000 back on your return. There’s a law say, you can put more 10 grand if if you take it out of your tax returns, that’s what your tax refund.
Jude Heath 05:32
Yeah, yes, the answer to your question is yes, but since you weren’t an eye bond holder in 2021, you wouldn’t be able to do it for this 2021 return that you just filed. But when you file 2022, you’re allowed per tax return. So if you’re married, filing joint, you know, single at a household, whatever per tax return, you are allowed to divert up to $5,000 of overpayment as a refund. Two additional five bond purchases,
Gregory Ricks 06:06
that’s in addition to say somebody bought puts 10,000 and electronically, they can also divert 5000 from their tax return and get 15 in per Tax
Jude Heath 06:18
Return of the refund. So you need to make sure that you’re that you have a refund going into filing 2020 to overpay it by at least 5000 Well, that’s
Gregory Ricks 06:30
the next question I was gonna ask. So a strategy could be well, I’m overpaying 5k yen, so I get a refund to divert that strategy right there.
Jude Heath 06:42
Yes, that’s correct.
Gregory Ricks 06:43
To get 15k.
Yeah, that’s why I wanted to know, so we can get around it a little bit by putting in 5050 grand and every year. If you finagle your taxes to where you’re going to get a $5,000 refund, we can work it that way. Right?
Gregory Ricks 07:03
Legally? Yeah, that’s actually on the website. I just found that how much an eye bonds can I buy for myself? I’ve never had that question or thought about it that way. But that is a neat idea. There that like if you want to get some in well, overpay on your tax return. So you can get up to 15. But it says here in a calendar year, you can acquire up to 10,000 in electronic high bonds, and Treasury direct. And the next bullet point up to 5000. In paper I bonds using your federal income tax return the they’ve got three points on that I’ll give to you. Since you’re hanging on with us, the limits apply separately, meaning you could acquire up to 15,000 and I bonds and a calendar year. Bonds you buy for yourself and bonds you receive as gifts or via transfers count towards that limit. And if a bond is transferred to you, due to the death of an original owner, that amount doesn’t count towards your limit. And let’s see there’s two others here. If you own paper bond issued before 2008, you can convert it to an electronic bond in your account in Treasury direct, regardless of the amount of that bond, then your limit before 2008 was greater than today’s limit of $10,000. And the limits are applied per social security number of the first person named as owner of a bond or foreign entity per Employer Identification Number. See I told you there is a lot of information there on that and that’s a big help today dude. Thank you. Any other questions? Richard?
No, that’s gonna take care of my main question I had about the maximum so I’ll know now too. I think there’s an extra form we got to fill in to do that right from what I’ve read. Is that true?
Gregory Ricks 09:08
If you’re filing your tax return, more so for do it yourselfers, but Jude said you know it’s a really easy number to remember he said it’s 8888 is the form form 8888 It’s called the allocation of refund including savings bond purchases and part two is kind of the par for the savings bonds. So once again, Jude he thanks for that information there as well. So some more people want might want to do especially because she can only do it electronically at max of 10,000 but you can get another five max of 5k in through a tax refund and come up with an idea if you wanted to get some in and yet done your tax return. Send Iris Somani something send it back. I don’t know is it kind of late to do that. But if it’s an ongoing thing, think about it. You want to say, well, I want to get 5000 and some will make sure I’ve overpaid $5,000. So you can put that in there. I like that idea from that. I just wouldn’t do it too much ahead of time, because how much interest do they pay you on that extra money you give the IRS?
Jude Heath 10:22
Not very much, now kind of like shadow IT and it kind of like zero. It is and to be specific. But you know, one of the things we tell our clients is, is it’s good to have an overpayment.
Gregory Ricks 10:37
I know you shared with me that a few years back, I love that idea. Yes, please continue.
Jude Heath 10:43
It protects you from little oversights, little, little mistakes, if you missed a 1099, you know, whatever, you’ll get a couple of years later, you’ll get a notice saying, Hey, we matched up and you miss this document. Here’s the tax you owe on it. But we adjusted the overpayment, so you don’t owe interest in penalty. One of the things that stings so bad about the tax code, is when you miss something, and you get, you get dinged for the tax, sometimes two years later, the penalty and interest can be 50% of the amount of the tax, and that hurts. And so we encourage our clients, you know, it’s not a good investment. But it kind of helps you just in the event that it was an oversight, you didn’t have a document, you missed something.
Gregory Ricks 11:32
Okay, so you’ve you’ve overpaid for that reason, but at the end of tax time, you get the refund, but that overpayment still not there is it unless you’re just going to let it carry forward.
Jude Heath 11:45
Right. So we encourage our clients to not take the refund within reason, and just roll the reef carry, they say carry the refund forward to the next year.
Gregory Ricks 11:58
So then they would pull that forgotten thing out of that money, at some point forgotten to reduce your penalty and interest or anything, are there still?
Jude Heath 12:11
That’s correct, because they kept them, they were the holders of the money, you don’t get charged penalty and interest. Wow,
Gregory Ricks 12:21
I didn’t know that.
Jude Heath 12:23
So that’s why we encourage our clients keep a little in the tank, don’t drain it every year old, that’s my refund, and they don’t pay me any interest rate, we I want my money. Okay, that’s one way to look at it. But it is and and what we what we say is if you can keep a little small percentage of, you know, your taxes, your taxes every year in that bank, it just protects you, you know, we’re all about paying the least amount of taxes, penalty and interest included through the years. And everybody makes a you know, I left off this k one, I left off this 1099, that sort of thing.
Gregory Ricks 13:03
I like that idea. And then the savings bond money, if you’re going to try that, then stack that on top of it. But you always want to leave some in the tank because they’re not gonna charge a penalty and interest. And it’s always I could see it being some simple thing you forgot the note, the tin nut, you know, the 1099 of interest from that account that you haven’t touched in a while is thanks can sneak up like that. Yeah, I have that from time to time. But I like that idea of keeping leaving some in the tank. Up and above. I always owe them some money. But I liked that carry forward idea. And that’s real helpful on the penalty and interests kind of gets waived on that. So once again, good idea. And don’t forget if you’re doing a tax return in the future, and you won’t some of that extra money to go to a savings bond that’s form 8888. If you have Jude Heath doing it, you don’t have to worry about remembering that just tell him you want some of that money to go to a savings bond out there.
Okay, thank you very much.
Gregory Ricks 14:14
Awesome. So how did they reach you?
Jude Heath 14:18
Well, they can call your office, your office calls my office emails my office throughout the week. So or my website is Jay Heath cpa.com. My office number is 504, a three to 1873. We’re open eight to five every day you just call us we’re there. We answer questions. We answer emails. You got a question late at night. There’s a there’s a service on the website that accepts your question. Just email us your question. We’ll get it in the morning. We’re pretty available.
Gregory Ricks 14:58
Thanks so much for listening to me. Ask Gregory where we answer your financial questions. You can find us anywhere Podcasts can be found and on YouTube and Facebook Live every Saturday from 10 to one, subscribe, leave a review and tune in next time.
Podcast Intro / Outro 15:15
Thank you so much to our guests Jude Heath for joining us on this episode and don’t forget we have a complimentary download waiting for you on this topic if you go to gregoryricks.com/podcast89. Again that is gregoryricks.com/podcast89.
Bond obligations are subject to the financial strength of the bond issuer and its ability to pay. Before investing consult your financial adviser to understand the risks involved with purchasing bonds. Gregory Ricks & Associates is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Gregory Ricks & Associates are not affiliated companies. Gregory Ricks & Associates, The Total Wealth Authority is our trademarked tagline, it does not promise or guarantee investment results or preservation of principal nor does it represent a certain level of skill. Investing involves risk, including the potential loss of principal. Any references to protection, safety or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the issuing carrier. This radio show is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Gregory Ricks & Associates is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Gregory Ricks & Associates. Any media logos and/or trademarks contained herein are the property of their respective owners and no endorsement by those owners of Gregory Ricks & Associates is stated or implied Gregory Ricks & Associates has a strategic partnership with tax professionals and attorneys who can provide tax and/or legal advice. AEWM, Gregory Ricks & Associates, WJ Blanchard Law, LLC, J Heath & Co. and Mortgage Gumbo are not affiliated companies. This show is a paid placement.