just cashed in EE bonds - tax question

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eelwood
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Joined: Wed Jul 25, 2012 11:55 am

just cashed in EE bonds - tax question

Post by eelwood »

my wife just cashed in some EE bonds; i have a good idea of what the tax will be on the interest, given our tax bracket.

my question: how do I go about paying this? (we have never done this).

going through the IRS website, it seems like estimated payment is the way to go, and we can use direct pay. is the best best way to do this?

also, is there a dealine or any sort of time we need to pay the tax by? we plan to just go about it in a timely fashion; the estimated tax page mentioned something about quarterly deadlines, i dont know if that applies

thanks
e
Gill
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Re: just cashed in EE bonds - tax question

Post by Gill »

If you expected 2015 tax is covered by withholding or otherwise you don't need to do anything until you file your 2015 return. How much interest was realized on the redemption of the bonds? If it's small in relation to your other income you probably don't have to pay in anything additional.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
Topic Author
eelwood
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Re: just cashed in EE bonds - tax question

Post by eelwood »

the interest is close to 30k; we are in the 33% tax bracket, so around 10k interest i think. we would rather go ahead and pay the bill now rather than do any adjustments to withholding.
thanks
e
nolesrule
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Re: just cashed in EE bonds - tax question

Post by nolesrule »

If you haven't already, sign up for an EFTPS account. Once it's activated, you can make estimated tax payments electronically.
Jack FFR1846
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Re: just cashed in EE bonds - tax question

Post by Jack FFR1846 »

A few years ago, I had similar bond interest. My credit union 1099 included bond interest paid. I did nothing until paying my yearly income taxes. I still had a refund, so maybe that's a consideration.
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kaneohe
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Re: just cashed in EE bonds - tax question

Post by kaneohe »

eelwood wrote:the interest is close to 30k; we are in the 33% tax bracket, so around 10k interest i think. we would rather go ahead and pay the bill now rather than do any adjustments to withholding.
thanks
e
It's a balance........if you pay now w/ estimated tax, you'll have to file F2210AI (last page here) http://www.irs.gov/pub/irs-pdf/f2210.pdf
It's kind of like doing your taxes 4 times so if you like doing taxes, you'll love doing this.

If you tweak your withholding, as long as you meet the safe harbor (pay 100% of last yrs taxes by withholding; (or 110% if AGI was > 150K last yr), there will be
no penalty and you won't have to file F2210AI. Of course, you do have to come up w/ that 10K in April next yr.

just re-read OP........bonds already cashed in Q1 2015 so if you pay your estimated taxes by April 15, you might get away w/o filing F2210AI since you are paying as early as possible.....Q1 deadline.......but save records to show when you paid.
Last edited by kaneohe on Wed Mar 18, 2015 10:29 am, edited 1 time in total.
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G12
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Re: just cashed in EE bonds - tax question

Post by G12 »

We had a good amount mature this month, those things become a tax time bomb at maturity if you have significant income as you indicate. I had already done a trial run of our 2014 taxes, which should otherwise be similar to 2015, then included the interest for federal taxes. I paid at this link from a checking account, you can set it up for up to 30-days out, but the taxes are due by 4/15 unless you go the withholding route. Due to all of the current 403b catch-up/HSA and other deductions the withholding was not worth doing for us.

http://www.irs.gov/Payments
Gill
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Re: just cashed in EE bonds - tax question

Post by Gill »

eelwood wrote:...we would rather go ahead and pay the bill now rather than do any adjustments to withholding.
It's not something most of us would do, but if you really want to pay the tax now, simply prepare a Form 1040-ES for 2015 and mail in your check with it for $10,000. That should do it.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
jeff1949
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Re: just cashed in EE bonds - tax question

Post by jeff1949 »

nolesrule wrote:If you haven't already, sign up for an EFTPS account. Once it's activated, you can make estimated tax payments electronically.
Here is the link for the ETTPS system:

https://www.eftps.com/eftps/
2cents2
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Re: just cashed in EE bonds - tax question

Post by 2cents2 »

This won't help you now, but if you have any more EE bonds.. If you put them into a treasury direct account you can have tax withheld (you select the amount) from the payment.
Gill
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Re: just cashed in EE bonds - tax question

Post by Gill »

You really need to review this along with your entire tax situation for 2015. If you meet the safe harbor rules of estimated tax it is quite possible you don't have to pay anything in until 4/15/16. However, you indicated you wanted to pay it now, but you should be aware you are likely paying the tax more than a year earlier than necessary.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
FactualFran
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Re: just cashed in EE bonds - tax question

Post by FactualFran »

The main concern should be to avoid an underpayment penalty. According to the instructions for Form 2210 for 2014 (the form is used to calculate the underpayment penalty), you are exempt from the penalty if
The total tax shown on your 2014 return minus the amount of tax you paid through withholding is less than $1,000.
If possible, adjust your withholding so you own less than $1,000 with your 2015 return.

As other replies have indicated, you can make estimated income tax payments quarterly. Those payments are due by mid April, June, September, and January. The minimum quarterly payment due by mid April depends on the taxable income to the end of March; the one due by mid June depends the taxable income to the end of June, and so on.
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dratkinson
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Re: just cashed in EE bonds - tax question

Post by dratkinson »

Recall form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) is an acceptable way of paying taxes owed by the due date (next April). Could earn interest on the otherwise government loan until then.
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Gill
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Re: just cashed in EE bonds - tax question

Post by Gill »

dratkinson wrote:Recall form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) is an acceptable way of paying taxes owed by the due date (next April). Could earn interest on the otherwise government loan until then.
Why do that? Form 1040-ES is the proper form.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
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