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TreasuryDirect 1099-INT Sent To Wrong Bond Owner

TreasuryDirect took 16 weeks to process transfers of electronic EE bonds where I was already a named beneficiary of a decedent who passed away in November last year.   Some of those bonds matured this year (March) before TreasuryDirect transferred them to my account and because of that delay they say they'll send a 1099-INT to the decedent?   They have since transferred the proceeds from decedents cash account to my own bank but I can't get them to change where they intend to send the 1099-INT.   Can I somehow pay the taxes on this 1099-INT as if it was (and should have) been sent to me had they processed things in less slow way and make that clear to the IRS?  It would be painful to have to deal with decedent tax records who already filed a final return and never had any assets, estate, or executor because all assets had been pre-declared prior to death with every financial institution.    Gives great pause to TreasuryDirect statements about their Savings Bonds when they explicitly say “If a surviving co-owner or beneficiary is named on the savings bond, the bond goes directly to that person. It does not become part of the estate of the person who died."

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3 Replies
MarilynG1
Employee Tax Expert

TreasuryDirect 1099-INT Sent To Wrong Bond Owner

Yes, you can report the interest as beneficiary on the Savings Bonds as if you had received the 1099-INT, since the decedent's final return has already been filed. 

 

There's a special rule for U.S. Savings Bonds, from which income generally accrues tax-free until the bonds are cashed in. When the bond owner dies, the accrued interest may be treated as income in respect of a decedent.

 

In that case, the new owner of the bonds becomes responsible for the tax on the interest accrued during the life of the decedent. (The tax isn't due, however, until the new owner cashes in the bonds.)

 

Alternatively, the interest accrued up to the date of death can be reported on the decedent's final income tax return. That could be a tax-saving choice if the decedent is in a lower tax bracket than the beneficiary. If that method is chosen, the person who gets the bonds only includes in income the interest earned after the date of death.

 

Here's more info on Taxes and Death in the Family.

 

Sorry for your loss. 

 

@inquire-about 

 

 

 

 

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TreasuryDirect 1099-INT Sent To Wrong Bond Owner

Why thank you @MarilynG1  for your incredibly fast reply.   That's a great help.   

 

Unfortunate to see I'll be responsible to file another "final" tax return again next year to show that incorrectly assigned 1099-INT income and then deduct it by documenting that it went to a beneficiary who is responsible.

 

Just might get me to go back and look through this year's filing and perhaps include all the accrued savings bond interest up to the date of death since I had lots of deductions last year that I no longer have in future filings.

 

Well,  I'm not done giving up some chance that I'll ever get through to someone at TreasuryDirect who should see that a POD beneficiary of an electronically held savings bond should be the owner and responsible from the date of death and not months later when TreasuryDirect arbitrarily gets around to reissuing the bond in the beneficiary's name.   Advantage paper savings bond owners who wouldn't have this problem.   They could have gone to a bank and cashed the matured bond and received the 1099-INT as beneficiary.

 

Thank you again for taking the time to help me understand and sharing that link to more information.   Very helpful.

DianeW777
Employee Tax Expert

TreasuryDirect 1099-INT Sent To Wrong Bond Owner

It's a great idea to amend and if you choose to do that you can also nominee the interest that belongs to the decedent by using the steps below.

 

Nominee Returns.

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. 

 

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

  • On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here: 

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