Can I pay interest on EE savings bonds before they mature?

[foxbrown2019]

I have series EE savings bonds that mature in 5 years. I would like to pay all of the taxes due on the accumulated interest so far. I am told that I can do this, but need to after this year pay the rest of the interest annually until they mature (or are cashed out.) Is this correct?

[TaxGuyBill · Accepted solution]

Yes, that is correct.

However, just be aware that when you cash them, it is likely the IRS will send you a notice because they will see that you did not report the FULL amount in the year of the sale (it is unlikely they will look back to the previous years to check that).  So you will need to respond to the IRS notice showing them that you reported the income in previous years.

[foxbrown2019]

Thanks. If I recall correctly, in TurboTax one reports the full amount of the interest in the year that one cashes/bond matures.  TurboTax then allows you to add a line to report the amount paid in previous years so that the sum results in the net amount of interest not reported.  But I suppose the IRS could still  ask for supporting documentation if they don't want to look at the prior years.

[rskoss]

TurboTax 2018 doesn't seem to allow the reporting of previously paid interest. When I try to enter the amount, TT tells me that the interest can not be previously reported because it's regular interest. This makes no sense.

[mesquitebean]

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@ rskoss wrote:
TurboTax 2018 doesn't seem to allow the reporting of previously paid interest. When I try to enter the amount, TT tells me that the interest can not be previously reported because it's regular interest. This makes no sense.

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It's been a while since your post, but I'll leave this for anyone else who stumbles onto this old thread.

Savings Bond interest is entered in Box 3 of the 1099-INT.   It sounds like you entered it in Box 1.   When correctly entered in Box 3, then the amount can be adjusted, if necessary, on a subsequent screen.