Reporting interest on long lost and now found Savings Bond

[Michael - 47]

I recently found a record of a long lost paper EE Savings Bond that belonged to my deceased father.  He died in 2003 and his estate was settled a couple years later.  The bond reached its final maturity in 2016.   We completed the paperwork and received payment for the bond this month.  I know that we will need to report all of the interest as income. Do we simply report it as being received this year? File an amended 2016 return? Something else? Any input will be appreciated.

[JotikaT2]

It depends upon how the interest income was treated by your father.  I realize this may not be practical as it has been many years that have passed.  

Essentially, your treatment will probably follow the accrual method as shown in the link below, where you report the interest income in the year the bond is cashed.  Since your father passed away several years ago, I am assuming there is no longer a trust filing requirement.

If so, the income will be reported on your 2021 income tax return since you have just cashed them out.

Please see the link below for additional information.

Reporting savings bond interest for a deceased taxpayer

[Michael - 47]

I should have been more clear on this point - I'm assuming and pretty certain my father did not report any interest during his lifetime.  My confusion comes in because one is supposed to report the interest when either of the following happens: One redeems the bond OR it reaches final maturity - whichever comes first.  Because it reached final maturity in 2016 it follows that I should have reported it then - but I didn't know it existed until now.  I guess the question is: Can I reasonably expect to get away with reporting the interest this year when I'll receive the 1099?

[Michael - 47]

@JotikaT2 I should have been more clear on this point - I'm assuming and pretty certain my father did not report any interest during his lifetime.  My confusion comes in because one is supposed to report the interest when either of the following happens: One redeems the bond OR it reaches final maturity - whichever comes first.  Because it reached final maturity in 2016 it follows that I should have reported it then - but I didn't know it existed until now.  I guess the question is: Can I reasonably report the interest this year when I'll receive the 1099?  I appreciate any thoughts.

[JotikaT2 · Accepted solution]

Since you did not even know of the existence of the bonds until 2021, you can report the interest income on your 2021 income tax return.  I would keep documentation to support your discovery of the bonds and the subsequent interest income from initial purchase until the date of maturity.  

Your 1099-INT will most likely be issued for the 2021 income tax year and therefore, you would need to match the year it is reported to the IRS to your personal tax return.

Please see the link below and see the section titled Reporting the interest all at once at the end for more details.  It does state a 1099-INT will be issued "early the next year" for any bonds redeemed.

Reporting redemption of bonds

IRS FAQ for reporting savings bonds