I tried it with TT19. I put in the amounts in box 3 and 4, selected I need to make an adjustment as Regina suggested, I put in the same amount from box 3 and clicked "previously reported". Worked as described. The tax owed went up when I put the amount in and back to where it was once I applied the adjustment.
Note that the number you put in to adjust is a positive number and not a negative number, as they point out a negative number ADDS more interest, rather than neutralizes it.
Looks like I've got about 20 more minutes of manual entry of about 14 bonds, and some tweaking of when the interest was earned (august) as they want to whack me for penalties and interest for under withholding. And a short letter of explanation to add to it when I e-file it, on the back.
Pretty sure this ends up in an audit situation. That'd be my first in six decades. Oh well, its all smooth sailing after this as I'll be selling the bonds at maturation and paying the taxes in that year. Hopefully if they do audit it won't go back more than 4 years, as I have zero records for his filings before 2016. Alzheimers is a fun disease. He often made noises about "not needing to file" and got incredibly defensive whenever I asked him about his bonds, since he was taking them to the bank to cash them, getting a regular 1099-INT from the bank, and nobody at the bank knew how to do it and had to call.
So for anyone in a situation like this with paper bonds, they DO require you pay taxes on the interest in the year they mature or the year you sell, whichever comes first. A wise strategy would be to have sold 2-3 of them every year, even if they had another year before maturation. He'd have been fairly tax neutral doing that, with just social security and a small pension. Instead, he treated them as though they weren't taxed until he sold them and he sold sparingly even though the bonds weren't accruing more interest. What ended up happening after I refiled back to 2016 to stop the penalties and interest from accruing and having to eat 5, 4 and 5 $10,000 bonds in the next 3 years as they mature, is that much of the interest he accrued over 30 years got eaten up by taxes, interest and penalties.
So...if you have older relatives that might be playing "shoebox bonds" like my dad, give them a heads up. I'm sure it was just a matter of time before the treasury and IRS caught on and whammed him with a very long and intrusive audit.
