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

[MoniqueLO_]

Please feel free to contact Customer Support so you can speak with someone who can assist you.

@o9kxcb 

[Troubletos]

UPDATE:  I found out why the IRS rejected my I-Bond.  By the way the "tax advocate" was useless.  They were assigned my case in November and I had one phone call with them.   The advocate was supposed to get back to me no later than February 3 and never did.   Anyway I had to find out myself the reason the I-Bond was rejected.  The IRS MADE AN ERROR transferring the data from Form 8888 to their format.  I filed a manual return.  On my form 8888 the total was $5,000.  The IRS added $5,000 in the direct deposit block (I had ZERO for direct deposit.)  This was an obvious blatant error on the IRS  that changed Form 8888 total from $5,000 to $10,000.  Now, due to the IRS error,  the total did not match form 1040. 

As it was impossible to communicate with the "tax advocate", numerous emails and phone calls are never returned.  I did mail both the tax advocate and the IRS "accounts mgmt" where the error occurred.  Got no response from that either. 

After numerous phone calls I was told by the IRS that "we are sorry, there is nothing we can do."  They just cut another check and mailed it to me instead of making it right and sending an I-Bond which they should have initially done in October 2021.  To add insult to injury, the 9 months they held onto my "voided check" that the IRS told me to return, they added ZERO interest.  On top of that the paltry interest I got initially for the IRS taking 8 months to process my original return, they said it was taxable.

Now if the table was turned and I made a mistake and owed the IRS money they would be all over it slapping on late fees and high interest charges etc.  It's also funny it takes just one day for them to process your electronic payment but it takes months for the IRS to process a refund.   

If you are getting a refund I would encourage you to E-File.  If you do a manual return it may take months for you to get your return processed and your refund back.  They are still blaming Covid for the backlog.   I'm still shocked how they can get away with it as I lost hundreds of dollars in I-Bond interest due to their failure to process the I-Bond back in October 2021. 

[CarissaM]

We are happy to hear you finally got a response on this issue. 

Please let us know if we can assist you further. 

[Troubletos]

Huh?  Please let you know if you can assist me further?  

Nobody assisted me in this matter.  I had to do all the research myself.  I was told last June 2022 by an IRS agent to void my check, mail it to Accounts Management, explain the problem and it will take 4-6 weeks to correct it.  As I mentioned the IRS made no attempts to correct anything, and it took NINE MONTHS to tell me that all the while holding onto my $5,000 credit.  When I got the check back, no additional interest was added.  If I owed them $5,000 nine months ago, my bill would have been $10,000 today from tacked on late fees and interest.   I literally spent hours making phone calls to the so called "tax advocate" and the IRS and I simply got the run around.  When I mailed the voided check back to the IRS, USPS tracking showed the IRS received my check on July 2, 2022.  FYI the IRS never had a record of my voided check for months; it was never scanned into the system until 8 months later.  The mail was simply received in July 2022 and sat for months in a warehouse.   We are going through some crazy times now. 

[EliseScott]

Yes, on April 19 2023 I received a $6179 refund when it should have been $1179 as stated on form 8888.  I'm guessing it's hopeless but I'll try the TAS system.

[Troubletos]

Good luck.  Best to start looking to make sure Form 8888 refund matches what is on your 1040.  If you have an online IRS account you can go to your 2022 tax return and see the amounts the IRS has on your form 8888 and 1040.   The numbers must match.

In my case the IRS made the error transcribing the numbers from my manual return, Form 8888 to their system.  That created the error as they erroneously added $5,000 direct deposit to my bank, along with my requested $5,000 IBond.  I had zero for the direct deposit.

I sent paperwork that clearly showed the IRS error to both the IRS so called TAX ADVOCATE who did nothing actually, and the IRS Accounts Mgmt department who handled my complaint.  All they told me was "there was nothing they can do" even though the IRS committed the error. 

Not only that, they held onto my refund of $5,146 for nine months.  Mind you the IRS agent told me to void the check, they will correct the error and get back to me in six weeks.  So after nine months I get the check back with no additional interest holding onto my money.   If it was the other way around and I owed them money ... I would be slapped with late fees, interest, etc.     

Maybe you will be lucky.  It will take months before you will get a decision.  

[bryanmaxwell]

I was more motivated to chase this problem to the ends of the earth when my rage was fresh but also when I bonds were getting 7+ percent and everything else was still getting 0.1 percent.

Now, 7-day money market yields are 4.8% and savings accounts are 4%, so you have to decide how much a delta of a couple percent is worth in terms of your energy.

Eg current I bonds at 6.8% vs MMF at 4.8% = delta of 2% x $5000 = an annual difference of $100, with less liquidity and more hassle. 

Time value of money.

[Troubletos]

I should have had an I-Bond issued to me in October 2021 when rates were high 8-9%.  Instead the IRS gave me interest of $180 for holding onto my $5,000 refund for 18 months, which is taxable.

Current I-Bonds are getting 6.7% ... but that rate ends April 27.  I suspect the new 6 month rate will be lower than that as inflation is falling.   You can get Savings account rates close to 5% now.   I locked into 12 month CDs at 6% and 7%. so it might not be worth the hassle of trying to get the IRS to fix their mistake.   I would do it if you can hold onto your refund, but if they tell you to return the check back to the IRS, count on them holding onto your refund for months getting zero interest.

[Troubletos]

TAS?  The IRS messing up your I-Bond purchase may be a blessing in disguise as I-Bond rates are going to fall soon as of May 1, 2023.  I'm guessing the rate will be just below 4% so you might be better off just investing in a 5% CD.  With I-Bonds you have to stay invested for five years.  If you withdraw early you give up three months of interest. 

[fanfare]

@EliseScott 

Do not bother the Tax Advocate.

They are trying to help taxpayers with hardship.

A slipup on your bond purchase request is not hardship.

[Troubletos]

To Fanfare ... level 15 you say ... 

Your post that I should not be bothering the Tax Advocate because I don't have a financial hardship is NOT accurate.   If you would have done your homework you would realize the Tax Advocate ALSO provides a service for those who have been unable to solve their tax problem through previous contacts with the IRS.  No hardship is required. 

Just pick up the phone, call and listen to their opening message.   In addition, the Tax Advocate Office would never have assigned an advocate to me as I told them I did NOT have a financial hardship, just an unresolved IRS issue.  

I hope your posted information did not mislead anyone who have been getting the runaround from the IRS from contacting the Tax Advocate.  

Posted by a lowly level 2.  

[Bill0223]

I have had the same problem for two successive years with no clue why IRS did not honor my paper I-bond request in my form 8888. Thanks to Bvi25, now I believe what Bvi25 pointed out is the root cause. It seems that all media and internet publications have missed out this important statement in Form 8888 instructions, which may have failed a lot of jointly filing couples requesting a combined amount of $5,050 to $10,000 paper i-bonds. By this fine print, it effectively limits to $5,000 paper bonds jointly filing couples can purchase in total rather than $5,000 each as most of the public have mistakenly believe.  

[Detour2]

That is incorrect. Even if you have purchased $10k of I-bonds, you are allowed to use your tax refund to purchase up to an additional $5k in I-bonds. (at least in 2022, 2023)  See https://www.forbes.com/advisor/investing/buy-i-bonds-with-tax-refund/