Form 8888 Savings Bond Purchase Failure

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ascenzm
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Form 8888 Savings Bond Purchase Failure

Post by ascenzm » Wed Mar 21, 2012 11:30 am

The Form 8888 approach to getting part of my 2011 Federal Income tax refund in Series I bonds did not work. The Form 8888 instructions state that the savngs bonds will be not issued if there is a math error that decreases the refund amount shown on the tax return. The IRS calculations showed that my refund was one cent (yes $0.01) less than what I calculated ($xxx5.99 vs. my calculated $xxx6.00 refund). I can only explain the difference in that I rounded all my figures to the nearest dollar amount as allowed in the Form 1040 instructions. This penny difference was apparently enough to have my savings bond request rejected.

The IRS didn’t follow their own rules and direct deposited the entire refund amount to my checking account (the instructions indicated that they’d mail me a check). At least I got all but a penny of my refund.

Advice seems to be not to round your figures to the nearest dollar as allowed per the Form 1040 instructions.

Mike
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ABQ4804
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Re: Form 8888 Savings Bond Purchase Failure

Post by ABQ4804 » Wed Mar 21, 2012 11:33 am

Bummer! Sorry that happened to you.

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ascenzm
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Re: Form 8888 Savings Bond Purchase Failure

Post by ascenzm » Wed Mar 21, 2012 11:41 am

alisa4804 wrote:Bummer! Sorry that happened to you.
Well thanks to Mel I have my $30,000 of 2001 3% fixed rate Series I bonds to console me. :happy

Mike
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Sunflower
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Re: Form 8888 Savings Bond Purchase Failure

Post by Sunflower » Wed Mar 21, 2012 12:22 pm

Mine failed too although I have no idea why. Oh, well...

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jackpistachio
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Re: Form 8888 Savings Bond Purchase Failure

Post by jackpistachio » Wed Mar 21, 2012 2:42 pm

Mike, did the IRS send a letter stating this as the reason for the adjusted refund?

I filed Form 8888 for Series I bond purchase and just had the full refund amount ACH'd to my bank account today, including the amount that was allocated to the I Bonds. The refund amount didn't differ from the total refund I reported in the return (i.e., no one cent differences). I don't know if the I Bonds will show up in the mail.
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Flobes
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Re: Form 8888 Savings Bond Purchase Failure

Post by Flobes » Wed Mar 21, 2012 6:18 pm

Today, mine failed too, similarly. Total amount deposited into the bank account, with no discrepancy, with no bonds issued, with no explanation.

Tomorrow I'll call IRS. And then my friendly Senator's office.

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ascenzm
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Re: Form 8888 Savings Bond Purchase Failure

Post by ascenzm » Wed Mar 21, 2012 8:41 pm

Flobes wrote:Today, mine failed too, similarly. Total amount deposited into the bank account, with no discrepancy, with no bonds issued, with no explanation.

Tomorrow I'll call IRS. And then my friendly Senator's office.
I received a IRS Notice CP53 that contained contradictory statements. As far as I can tell, the government does not want to issue paper I bonds. Using the recommended IRS roundup/round down rules it would be almost impossible for my calculated refund amount of $xxxx.00 to match the IRS calculated refund since they included cents in their calculations. The Excel spreadsheet that I used to calculate my taxes automatically rounded all amounts to the closest dollar.

I have my refund in my checking account so I probably will not bother calling the IRS.

Mike
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ascenzm
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Re: Form 8888 Savings Bond Purchase Failure

Post by ascenzm » Wed Mar 21, 2012 8:55 pm

jackpistachio wrote:Mike, did the IRS send a letter stating this as the reason for the adjusted refund?

I filed Form 8888 for Series I bond purchase and just had the full refund amount ACH'd to my bank account today, including the amount that was allocated to the I Bonds. The refund amount didn't differ from the total refund I reported in the return (i.e., no one cent differences). I don't know if the I Bonds will show up in the mail.
Jack,

They mailed me a form CP53 dated March 19, 2012. The explanation on form CP53 was two paragraphs: "We had to do some additional processing on your tax return. Therefore, we weren't able to honor your request for direct deposit of your tax refund and are sending you a check instead. As a result, you should receive a refund check in the mail in 3-4 weeks.

We can't honor your request to purchase a savings bond with your refund because the refund amount you calculated on your return doesn't match our calculations"

The form also stated: "What you need to do You don't need to anything. We'll deposit your refund in the last bank account on Form 8888, Allocation of Refund (Including Bond Purchases)"

My calculated refund amount was $xxx6.00, part of which was to be allocated to Series I bond purchases and the remainder was to be directed deposited to my bank account. The IRS calculated refund amount, which I found out by checking my bank account's activity via my bank's website, was made on March 7, 2012 and was exactly one cent less ($xxx5.99) than my calculated refund amount. If the IRS followed their own rounding rules then their refund amount would have been rounded up to $xxx6.00 and would be an exact match to my calculated refund. This tells me that the US Treasury does not want to issue Series I paper savings bonds. It also tells me that my 2011 federal tax return was done correctly since the IRS calculated refund essentially matches my calculated refund.

Mike
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Flobes
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Re: Form 8888 Savings Bond Purchase Failure

Post by Flobes » Wed Mar 21, 2012 9:04 pm

I had an extended conversation with the IRS.

The examiner confirmed that my return was correctly filed, and bonds should have been issued according to my instructions.
I was “on hold” several times as he and his supervisor tried to figure out what went wrong, and they called for guidance within the IRS.

The conclusion is that this is a “programming error” which cannot be reversed by the Customer agents, who have no ability or authority to pull the funds back out of my bank account.

I was able to cite this thread as demonstration that mine is not an isolated incident. (Yeah Bogleheads!)

BTW: I asked, and the failure to get our bonds has nothing to do with the rounding of pennies in the return or the refund.

He said the next step is to write all of my details, including his IRS ID# and his determination that full refund to my account was an IRS programming error, and send it to the IRS Service Center. They stated that as this is an IRS system programming error, the IRS will find a way to resolve it and make us taxpayers whole again. And the more complaints they get, the faster and completer this correction will be.

So if you’ve not yet filed, do a paper return with your Form 8888 and attach postage stamps rather than efiling.

For those of us who have been denied our bonds in error:
First call the IRS and get an agent ID# and a determination that there is no problem with your return or your Form 8888.
Then write to you Service Center (the phone agent will give you an address). We will help each other as well as ourselves if we all call and write.

Tomorrow, I’ll call the offices of both my (very liberal) Senator and (Tea Party) Congressman to ask for the assistance of their constituent services.

ABQ4804
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Re: Form 8888 Savings Bond Purchase Failure

Post by ABQ4804 » Wed Mar 21, 2012 9:19 pm

You know, Treasury may have just run out of paper I bonds - I remember an earlier post from Mel Lindauer relaying a response from Treasury saying something like they would issue paper I bonds thru tax returns "indefinitely." Also there was another post saying something about Treasury not "issuing" new paper I bonds, which I interpreted as they would continue offering their shelf stock until exhausted, but not print more paper bonds. So just an idea to consider. Wish I had joined Bogleheads years ago and learned about purchasing paper I bonds earlier. Good luck on this.

beardsworth
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Re: Form 8888 Savings Bond Purchase Failure

Post by beardsworth » Wed Mar 21, 2012 9:25 pm

An IRS "Caution" concerning Form 8888, posted on the IRS site in November 2011

http://www.irs.gov/formspubs/article/0, ... 86,00.html

says: "Delays in processing may affect your refund split. If the processing of your return is delayed, your refund will not be split; all of it will be deposited into the first account listed on Form 8888."

I don't know if the "split" referred to means the "split" between paper I bonds and bank account, or only a "split" between two different banks.

Just today I called IRS's toll-free check-status-of-refund number, entered the information, and got an announcement that processing of our return had been delayed. Based on the language above, it appears that we won't be getting paper I Bonds, although I don't know why.

On another thread a while ago

http://www.bogleheads.org/forum/viewtop ... b#p1243600

I observed that Treasury had formulated enough loopholes to escape issuing paper I Bonds tax refunds at the slightest provocation, if it wanted to. The fact that a growing number of people on this forum--in this thread and others--report difficulties getting the bonds seems to confirm that view.
Last edited by beardsworth on Wed Mar 21, 2012 9:27 pm, edited 1 time in total.

sscritic
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Re: Form 8888 Savings Bond Purchase Failure

Post by sscritic » Wed Mar 21, 2012 9:26 pm

alisa4804 wrote: Also there was another post saying something about Treasury not "issuing" new paper I bonds, which I interpreted as they would continue offering their shelf stock until exhausted, but not print more paper bonds.
I may be the guilty party, but I was writing tongue-in-check. In that spirit, I suggest the IRS and Treasury put up a "on back order" notice or "this item is currently out of stock and it may or may not be restocked."
:) <-- does that help?

Sam I Am
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Re: Form 8888 Savings Bond Purchase Failure

Post by Sam I Am » Thu Apr 05, 2012 5:54 pm

Message deleted.
Last edited by Sam I Am on Tue Oct 08, 2013 3:03 pm, edited 1 time in total.

Default User BR
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Re: Form 8888 Savings Bond Purchase Failure

Post by Default User BR » Fri Apr 06, 2012 3:00 pm

Sam I Am wrote:Frankly I wouldn't have risked the chance the IRS would have found some bogus reason to keep my extra funds, though I am totally honest with my returns.

I just picture myself receiving a warm letter stating I had failed to report $1.25 in tax year 1971, and owed $5,000.00 in back taxes, penalties, and fines.
They can only go back three years unless there was an under-reporting of income equal to some sizable percentage of the total.

People are owed significant refunds all the time without much hint of the IRS figuring ways to illegally seize them.


Brian

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Re: Form 8888 Savings Bond Purchase Failure

Post by Anon1234 » Wed May 16, 2012 11:50 am

I also had an I-bond request rejected (first response of three 1040s filed). This was a return I filed for my kid. They sent a form CP53 stating that "The direct deposit amount claimed on form 8888 was not allowed because the amount claimed on form 8888 did not match the refund amount. As a result you should receive a refund check in the mail in 3-4 weeks." In this case the whole 1040 tax return was 2 items... $5000 payment with extension to file, and form 8888 requesting $5000 in I-bonds. So, they do match, exactly. Three IRS agents confirmed (in a 97 minute call), and now my return is being reviewed by a specialist which will take 15 business days. I referenced this thread and the "programming error" but none of the agents were convinced or even interested enough to take the link to this thread.

Not sure this was such a wise idea, but now I'm into it.

Another interesting note, the CP53 form was received by me on May 14, 2012, but was dated May 21, 2012 (1 week in the future).

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Re: Form 8888 Savings Bond Purchase Failure

Post by Anon1234 » Wed May 23, 2012 8:38 pm

Second of three failed. IRS refunded $14,665.43 instead of $14,666 and no I-bonds (every line entry was rounded to the whole dollar as allowed). :annoyed

Contacted Senator.....

Is anyone else having the problem, anyone getting it resolved?

renter
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Re: Form 8888 Savings Bond Purchase Failure

Post by renter » Wed May 23, 2012 9:19 pm

Sorry it didn't work out. I was assuming the worst (that my full refund would be refunded in cash) but was pleasantly surprised when only the delta was deposited in my account, and a few days later the bonds came in the mail. I snail mailed my return, not sure if that made some kind of difference.
ascenzm wrote:The Form 8888 approach to getting part of my 2011 Federal Income tax refund in Series I bonds did not work. The Form 8888 instructions state that the savngs bonds will be not issued if there is a math error that decreases the refund amount shown on the tax return. The IRS calculations showed that my refund was one cent (yes $0.01) less than what I calculated ($xxx5.99 vs. my calculated $xxx6.00 refund). I can only explain the difference in that I rounded all my figures to the nearest dollar amount as allowed in the Form 1040 instructions. This penny difference was apparently enough to have my savings bond request rejected.

The IRS didn’t follow their own rules and direct deposited the entire refund amount to my checking account (the instructions indicated that they’d mail me a check). At least I got all but a penny of my refund.

Advice seems to be not to round your figures to the nearest dollar as allowed per the Form 1040 instructions.

Mike

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Re: Form 8888 Savings Bond Purchase Failure

Post by bnes » Wed Jun 25, 2014 4:04 pm

If I receive paper bonds via a tax refund, can I eventually register those electronically at treasury direct?

sscritic
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Re: Form 8888 Savings Bond Purchase Failure

Post by sscritic » Wed Jun 25, 2014 4:16 pm

bnes wrote:If I receive paper bonds via a tax refund, can I eventually register those electronically at treasury direct?
Yes, along with your other paper bonds you bought six years ago. It's called conversion. Read this:

Convert Your Paper Savings Bonds Using SmartExchange
https://www.treasurydirect.gov/indiv/re ... geinfo.htm

The bonds in TreasuryDirect will then be converted bonds, for which the rules are slightly different.

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