My wife's father passed away and left her HH Savings Bonds. On the face of the bonds, there was a face value and a deferred interest amount.

[ckcjeques]

These bonds were purchased by her father in 1982.  My wife cashed in those bonds and received the face value amount.  She has now received a 1099-INT from the Dept of Treasury.  This 1099-INT has a block 3 titled "Interest on US Savings Bonds and Treas. obligations".  This block 3 is further broken down into 2 columns.  The first column is titled "Annual Interest Paid" and has an amount of $0.00.  The second column is titled "Accrued Interest Reported" and has an amount somewhat greater than $0.  This amount happens to equal the sum of all of the deferred interest items on each face of the individual bonds.  There is also a block 4 titled "Federal Income Tax Withheld" which has an amount of $0.00.  Additionally, when my wife received the funds from the Treasury Dept, it was for the total amount of the face value.  She did not receive any monies for any of the interest.  My question is do I claim the "Annual interest paid"?  Or do I claim the "Accrued interest reported"?

[MichaelL1 · Accepted solution]

You will include the deferred interest (which it appears is listed as Accrued in your 1099) on an IRS 1099-INT for the year the bonds were cashed in. 

The amount of the deferred interest is included in the face amount of the HH Bond and is shown in a tax-deferral legend on the front of the bond.

Those HH bonds when purchased, has accrued interest from Series E or EE bonds that tax was never paid on.  

If she can find a copy of the father's return for 2012 that is when the bond matured and if the father did report the deferred interest then you may be alright.