What to do now?--Form 8888 I-Bond Purchase Request Ignored by IRS

[job4mike6]

Obtained EFT deposit of federal refund earlier today.  However, I filed IRS Form 8888 to purchase I-Bonds with part of my refund and this did not occur.   I reviewed my 2021 TT file [online Premier] and the Form 8888 is there with the split refund between my credit union account and I-Bond purchase requested. 100% of refund was deposited in my credit union account.

1- Is there any way to correct this apparent error by IRS?  

2- Has Treasury Department made an official announcement curtailing the I-Bond purchase program and I missed the memo?

3- My spouse and I made separate purchases of I-bonds earlier in 2021 to the $10K per year per person maximum.  I believed I-Bond tax refund purchase was a permitted method to exceed $10K per year per person maximum.  Anyone with I-Bond program expertise able to validate this idea?

Thanks in advance to community members and TT staff for your consideration.

[JulieS]

No, there is no way to correct this as you have already purchased the maximum allowed amount of I bonds for this year. 

The $10,000 per person per year cap applies to all your I bond purchases whether through Treasury Direct or your tax refund. 

The Treasury Department has not curtailed the purchase of I bonds. 

[job4mike6]

Thank you JulieS for this prompt response. I respectfully beg to disagree.  Do you have a reference from the Code of Federal Regulations or similar authoritative source for your statement cited just below?

"The $10,000 per person per year cap applies to all your I bond purchases whether through Treasury Direct or your tax refund."

I conducted further research in the electronic code of federal regulations (ecfr.gov) and found the following citations:

• 31 CFR 363.52(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.
• 31 CFR 360.10 The amount of savings bonds of Series I which may be purchased and held, in the name of any one person in any one calendar year, is computed according to the provisions of § 360.11 and is limited as follows:
• 31 CFR 360.10(a) General annual limitation, $5,000 (par value).

These limits are separate and I believe additive. Part 363.52(a) refers to electronic I-bonds and Part 360.10(a) refers to the old school paper I-bonds

Furthermore, your statement is contradicted by the following quote from the Treasury Direct web site:

Quote

How much in I bonds can I buy for myself?

In a calendar year, you can acquire:

• up to $10,000 in electronic I bonds in TreasuryDirect
• up to $5,000 in paper I bonds using your federal income tax refund

Two points:

• The limits apply separately, meaning you could acquire up to $15,000 in I bonds in a calendar year
• Bonds you buy for yourself and bonds you receive as gifts or via transfers count toward the limit.

Unquote

link:https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm#myself

If my citations from the Code of Federal Regulations are authoritative and germane to my circumstance, I'm still left with what to do to get my paper I-bonds issued with my federal tax refund amount.  I'm also concerned the IRS potentially has a systemic Form 8888 processing problem.  Does TT have a good communications link with cognizant IRS officials to address potential systemic problems with taxpayer refund processing errors?

Thank you for considering my rebuttal, my follow-up query, and, JulieS, I wish you the best always.

[JulieS]

Yes, you are correct, you can purchase up to $5000 of paper I bonds with your tax refund and that is in addition to your electronic bonds purchase. 

I assumed that since you can't purchase paper I bonds any other way now, that would effectively eliminate the $5000 limit. 

As far as why your Form 8888 election was not processed, I found this on the Treasury direct website:

"If the IRS encounters errors on a return (refund amount is calculated incorrectly, IRS Form 8888 is completed incorrectly, requested amount is not a multiple of $50, etc.), the bond purchase will be cancelled and the full refund amount (if any) will be delivered to you."

I am not sure why you didn't get your bonds, but Treasury Direct says to call 844-284-2676 if your refund was processed and you didn't get your bonds. 

[bryanmaxwell]

Anyone figure out what to do about this?

I have the same problem.  They just ignored my request and sent me a direct deposit refund.

So maddening.

I have not maxed my electronic purchases this year so that's not it, even though I agree with the reasoning that that shouldn't be a problem anyway.

Tried to call the IRS and just get the message that the wait time is so long, don't even bother, try another day.

[baatsmth]

They didn't buy an i bond for us either.

In the irs2go app it said (generic form message) that they didn't buy a bond because we had a past obligation due (not sure that's the case, and even if it was, there was enough money to buy the i bond) or because the amount was not a multiple of $50 or was over $5,000 (unlikely). 

I called the above # that Julie provided and eventually navigated to be able to reach a person. The outgoing message said estimated wait time is 2 hours or more. I found no option to leave a number to be called back. I hung up.

I called a standard IRS number twice before that, and it just gave me an automated menu with no way I could tell to reach a person. That # was: Individuals [phone number removed]   7 a.m. to 7 p.m. local time https://www.irs.gov/help/telephone-assistance

I contacted Treasury Direct, and not surprisingly they told me to contact the IRS.

Here are 3 options but I don't know if they'll work:

1.Contact the IRS by phone (at the 1040 # above), which likely won't work. I didn't find a way to email the IRS.

2. Make an appointment at a local IRS office. Apparently there's a difference between a TAC and a TAS office. Here's for the TAC: https://www.irs.gov/help/contact-your-local-irs-office

3. You can submit a case to the IRS's Taxpayer Assistance Service (TAS) I think by phone, and definitely by fax or mail. If enough of us do this, maybe they'll fix the system, or maybe at least we can buy the bond after all somehow, like they'll make an exception to the 10k limit if necessary because it was the IRS's fault. The IRS should call the taxpayer if there's a question about buying the i bond instead of just refunding the whole amount. https://www.taxpayeradvocate.irs.gov/contact-us/ or https://www.taxpayeradvocate.irs.gov/wp-content

/uploads/2022/04/CaseAcceptance_040422.pdf All in person TAS offices are closed per https://www.irs.gov/advocate/local-taxpayer-advocate.

Good luck. Hope this helps.

[SweetieJean]

I am in the same boat.  Unable to get through to IRS.  Treasury Dept Retail Sales Section has a very long "press this" menu where none of the options apply.  I will try Taxpayer Advocate.

[Zirpto]

My return with I-bond request is still processing, but this thread worries me.  I'm wondering if it has anything to do with the names for the bond registration.  The IRS instructions say use only first name then last name.  I also named a beneficiary and put a checkmark.   So I'm kinda on edge until I see what happens.

Also in instructions:

"Your entire deposit may be deposited in one account. If there are any delays in the processing of your return by the IRS, your entire refund will be deposited in the first account listed on Form 8888. Make sure the first account you list on Form 8888 is an account you would want the entire refund deposited in if this happens."

[ryschultz]

Same boat here - I had form 8888 completed with my online return and I looked today and I am receiving 100% of my refund to my bank account. 

this is what I see on the IRS website re: refund status 

You requested that part or all of your refund be used for a US Savings Bond(s) purchase. However, we could not honor your request for the savings bond purchase due to one or more of the following reasons:

• The bond amount you claimed was not in a multiple of $50 or it exceeded $5,000.
• You owed a past due obligation to which we applied part or all of your refund.

The bond amount was an even amount (divisible by $50.00 yet under $5k) to be used for a bond purchase with my refund. I am a little frustrated as to why my refund processed so easily in Turbotax and nothing was raised where the bond purchase would not materialize. Wonder how many others have this same problem and if it is a turbotax issue or an issue where treasury direct has been so busy the past few weeks they ran out of capacity to process these requests. Either way it stinks. 

[SweetieJean]

In my case, the WMR site said the bonds would be issued, and the refund balance sent to me.  I ended up sending the Tax Advocate all my documentation, and will now wait (probably a long time) to see what happens.  In the meantime, I'm missing out on the I Bond rate of 9.62%

[Lys100]

Exactly same happened to me! I always over pay my tax and they refunded all without issuing the paper Ibond.

[Bvi25]

And yes, the same thing happened to me.

I would like to know what recourse I have available now to rectify their error.

I tried calling the helpline yesterday and it would not even allow me to be put on hold because they recorded message said they had too many calls.

What a pain!

[Bvi25]

Upon further investigation, I discovered the answer in the IRS Form 8888 Instructions.:

"You may request up to three different savings bond registrations. However, each registration must be a multiple of $50, and the total of lines 4, 5a, and 6a can’t be more than $5,000 (or your refund amount, whichever is smaller)."

Our problem is that the total on our JOINT return was $5000 for myself and $5000 for my spouse, which when totaled ($10,000), exceeds their $5000 limit in totality. 

So if you filed jointly and asked for $5k each, they won't do it. They limit it to $5K per return filed.

[SweetieJean]

Here's an update on my own situation:  The Tax Advocate advised me that the IRS declined my Form 8888, which it flagged as possible Identity Theft due to (1) my large total refund, and (2) the fact that this request was inconsistent with how I had chosen to receive my refunds in previous years.  She went on to say that she had received several similar claims from other taxpayers.

Unfortunately, she does not know why the IRS did not notify me and thus give me a chance to prove my identity, but instead just did a direct bank deposit of the gross refund.  She further advised that there was nothing that could be done at this point to rectify this.

I will say that my experience with the Taxpayer Advocate was a friendly, professional, and timely one; although the outcome was other than I had hoped for.  Reading between the lines, it sounds like the IRS wasn't prepared for the increased Savings Bond demands due to the unusually high interest rates and extensive publicity re using tax refunds to purchase them.  As a result, their existing checks and balances to weed out fraud caught some of us innocents!

[mesquitebean]

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@ SweetieJean wrote:

Here's an update on my own situation:  The Tax Advocate advised me that the IRS declined my Form 8888, which it flagged as possible Identity Theft due to (1) my large total refund, and (2) the fact that this request was inconsistent with how I had chosen to receive my refunds in previous years.  She went on to say that she had received several similar claims from other taxpayers.

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Sorry that happened to you.  ☹️   Frustrating indeed, when you did absolutely nothing wrong.   I'm glad the Taxpayer Advocate Service experience was a positive one in terms of helpfulness, even if they couldn't actually change anything.

IMO, the IRS didn't think that through well.   That would be a dumb way for an ID thief to steal part of a refund, since the I-bonds cannot be cashed by anyone for at least a year.  And even after a year, additional notarized/verified ID is required when cashing it.  

In the future, I wonder if having a voluntary IP PIN would be helpful  in a prophylactic sense.  Then the IRS would always know it was indeed you filing the return, no matter how large the refund, or whether or not I-bonds were selected.  Of course, as you know, that would obligate one to using a new IP PIN every year after that, too.