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

[Mike9241]

do know that you can go online and buy up to $10,000 of I-Bonds for yourself.

https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm  

[mesquitebean]

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@ Mike9241 wrote:

do know that you can go online and buy up to $10,000 of I-Bonds for yourself.

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That's indeed true for someone who has not yet met the annual $10,000 per-person limit in electronic I-bond purchases.   This year, however, there is a large number of people who have already maxed out their annual Treasury Direct electronic purchase and who want the additional $5,000 in paper I-bonds through the Federal refund.  Demand is high due to the high interest rate caused by the soaring inflation rate.  Every little bit helps soothe at least some small portion of the inflation sting.   The demand for the paper I-bonds has been enhanced this filing season by a large number of economic news articles touting them, and some folks made a $5,000 extra tax payment (such as an excessive extension request payment) just to get them.

[SweetieJean]

The irony of all this is that I made a $5,000 estimated tax payment online at the end of 2021 just so that I could claim $5,000 worth of my refund in bonds.  I doubt an identity thief would go to that measure, and then wait weeks (or months) for the bonds.

[SweetieJean]

and yes, I had already purchased $10,000 of bonds electronically using my Treasury Direct account.  The Tax Advocate told me that many of the others she was helping had done the same.

[Troubletos]

I have a related problem.  I too filed a Form 8888 I Bond Purchase of $5,000.  My total return credit was $7,200.  I chose to get the $5,000 refund to pay for the I Bond and the rest I chose to roll it over until the next year.

Instead I get a letter from the IRS stating the Direct Deposit of $5,000 on Form 8888 does NOT match the refund amount.  Therefore the I Bond Purchase was disallowed.

Today I got a check for $5,183.   Now get this THE REASON THE REFUND OF $5,000 DID NOT MATCH FORM 8888 WAS BECAUSE THE IRS ADDED INTEREST DUE TO THEIR DELAYING PROCESSING MY ACCOUNT.  Instead of adding the interest of $183 to the rollover amount, they added it the refund amount.  So the I BOND request gets rejected because the numbers do not match.   The IRS botched it up, not me.  So here I am out of an I Bond due to the IRS delaying processing my return.   

  That is simply crazy, incompetence at its worst.  What do I do now? 

[bryanmaxwell]

Nothing you can do.

Eat it and try again next year.

And/or move to a country where your tax dollars actually get you something.

[Troubletos]

So true.   Due to an IRS administrative error I was out of a $5,000 I Bond that should have been earning interest since last October.  That is about $350 lost interest so far.  Since I can't purchase this bond directly , I lost the opportunity to get this bond.  That will amount to thousands of dollars of lost interest over the years.

I tried to contact the IRS.  You cannot get through to a live person.  If you are lucky enough to even get to be put on a "over 60 to 90 minute hold" chances are your phone will be disconnected after waiting for 45 minutes or so.  It happened to me twice now. 

One time I did get through and the agent said this is a "tax law" question. Huh?  It was an administrative error.  Then he said I was ineligible, not true.  Got nowhere with the agent but they did connect me to the tax law department.  I asked for a direct number and they didn't have one.  The transfer went through; it was a 60 minute wait.  After 45 minutes the line was disconnected. 

For future reference I suggest you don't file manually in the future.  It took 8 MONTHS for the IRS to process my manual return.   When I contacted an agent two months ago they said it was due to covid.  Huh?  Odd as I live in California, one of the worst hit states from Covid, and they processed my return quickly.   Sadly the office is filled of ignorant and incompetent people that can only answer basic questions.    

[SweetieJean]

I had a similar problem, and contacted the Tax Advocate. She said that the IRS did this to a number of other taxpayers, but that nothing corrective can be done.

However, if you have not already purchased $10,000 in I Bonds this year, you can use your refund to do so by setting up a Treasury Direct account.

[Troubletos]

Thank you Jean.  It just doesn't seem justice was served.  I bet every individual who wanted to purchase an I Bond was rejected because of an IRS error of adding interest to the refund amount without your knowledge.  As I mentioned this opportunity to acquire this I Bond is lost forever as I have already purchased $10,000 directly from treasury.gov   We are maxed out at $10,000.  The only way you can get an additional $5,000 is through your IRS refund.  

It boggles my mind why this IRS mistake can't be corrected.  It is what it is I suppose. 

[Mike9241]

Congress really makes the tax laws not the IRS. write your Congresspeople.

[heath_durbin]

your next step is to write your congress person, the tax advcvacte SHOULD have the power to fix it, and congress needed to give them that power. 

[Troubletos]

I doubt my congress person can do anything but route the request to the IRS office.   What tax advocate are you referring to, the IRS?   I contacted them a few times.  Finally they got me to an IRS agent and they told me to void out the refund check and mail it back to another IRS address and explain the problem.  They also said it will take up to six weeks to process.

Well let's review.  I filed my 2020 taxes manually on October 15, 2021.  I got my unsolicited refund of $5, 183 because they said the refund amount did not match form 8888 $5,000 amount.  Unknowingly the IRS gave me an interest credit of $183 because it took them nine months to process my return, so now the IRS CAUSED THE IMBALANCE. 

However, if you go to the treasury direct website it clearly states that if additional credits are added to your account the IRS will process the I-Bond request.  The added balance will be then issued as a credit return.  Well that did NOT happen.

Getting back to the IRS agent who told me to void my check and return it to the IRS.  Well its been OVER THREE MONTHS and the IRS agent told me there is NO RECORD of it even being in the system yet.  The voided check was received by the IRS per USPS tracking.

In summary, the IRS has my refund FOR OVER A YEAR now. I could have earned $500 in interest if they processed my original return timely and honored my I Bond request.  The agent's reply when I asked what is going on with the delays?   They used the COVID issue, like they have to put all the manual returns in a warehouse, no staff etc.  And get this, I live in California which is #1 out of 50 states as to the number of Covid cases and they processed my return timely. 

There is simply no excuse for the IRS to have such delays. I suspect it will take another nine months to even get to even process the I Bond if I am so lucky.  I may never see the refund again.  

[heath_durbin]

Yes, Write congress... two things can happen... they have in-roads to the IRS and they can pass laws to make it easier. 

[bryanmaxwell]

also you could wish on a rabbit's foot for a pet unicorn.

see if that produces better results.

[o9kxcb]

I am having this issue, this year for the 2022 tax year.  Is anyone else having the same issue this year?