In this video, Bridget and John discuss the process of finding the 1099-INT for selling I bonds in 2023. They walk through the steps of navigating the I Bond site to locate the necessary tax form. Whether you're a seasoned investor or new to the world of I Bonds, this guide will help you understand the process.
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TRANSCRIPT:
Bridget: Hi John. I sold I bonds in 2023, and I had to find the tax form. They don't send it to you, so in this episode we're going to go over how to find the 1099 INT on the I bond site. Hi, I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois.
John: And I'm John Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. Before we dig into Treasury Direct and how to find that 1099, I want to remind all our viewers to hit that subscribe button. We're trying to get 1000 subscribers. So I'm looking forward to hearing about how to find my 1099 INT. Usually when you have a transaction that's taxable, the company sends you a 1099. All you got to do is collect the thing and give it to your tax preparer. But not so much when you're talking about selling I bonds.
Bridget: Yeah. Not sure why. Maybe they're trying to give you the interest and not have any administrative costs. And that could explain the whole I bond site, because it's very bare bones and hasn't been updated in quite a while, but it does seem secure. Okay. So step one is log in. That might be the hardest part.
John: I'm laughing. It sounds so silly, but those of you who have bought I bonds on the website, you know, that is not necessarily an easy thing.
Bridget: I don't want to oversell it, but you have to log in, so that means you got to find your username, you got to find your passwords. And they ask for a one-time passcode. And I sold some I bonds and my husband sold some I bonds too. And like a lot of people, I log on as him, so he had to get his one-time password too, which actually goes to his email account, then he had to text it to me. So that's the situation. You have to find it, you have to log in, you have to get on the site. That was step one. Again, probably the hardest part.
Step two, when I got on the site and it said, you've got a message. I thought, “Okay, that'll probably help, right?” So I went to the Investor Inbox and clicked on the tax statement notification. You can see the Investor Inbox. There's a menu at the top, and you can see where the Investor Inbox is. So I went over there. I clicked on the tax statement notification. That, I got to admit, was a little disappointing, but it did give me an idea about where to find it. But it didn't just link to the thing directly, which I thought it should.
John: So wait a minute. And I've not sold I bonds. Maybe I'm not going to sell them after hearing this, but thanks for walking us through this here. So you log in and it's got the message that says, “Hey, you've got tax information,” but the tax information actually isn't there?
Bridget: It just says, “You have to get it somewhere else,” but it tells you kind of where to get it. And if you really have a problem, here's a video. Then what it says is, you must go to the Manage Direct tab. So that's a different tab than the Investor Inbox, but it’s still on the top tabs. And it is trademarked. It's a registered trademark. “Manage direct.” Don't rip that off.
John: Is that right? I will be sure to keep that one off my website.
Bridget: They'll come after you. Who knows? Anyway, so you go to Manage Direct, and then actually, the situation gets easier. You could skip looking at your notice and everything if you want. You go to Manage Direct, and then the thing is that it's not the most elegant interface. So you go to the Manage Direct, and it’s with all the things that you can manage with your I bonds, It's on the bottom left, and it says, “Manage My Taxes.”
And then there is a hyperlink to “Year 2023.” And I clicked that hyperlink, and that's where I got it. So there wasn't anything more after I found that. So if I did this again, I would I forget about the, hey, you got a message at the beginning, and I'd just go to Manage Direct and look bottom left, and then click that bad boy. And that's how I got it. And then made a PDF of it, which I'll either print out or upload to all my different tax documents.
John: So there are some hoops to jump through as you get into. It's not really self-evident exactly where to go with that. And “Managed Direct” is sort of the key to the whole process.
Bridget: Right.
John: And one of the big takeaways that I hear from this is the lack of notification. And we joked about it before, but usually we'll get a notice from Schwab or Fidelity, or you get your W-2 in the mail, and it's available. And this is one of those that we need to remember as taxpayers if we sold some I bonds last year, and we've got some previous episodes that talk about why you might want to at least consider selling I bonds. If you sold those, you have to pay taxes on those gains, but it's not self-evident. They don't send you 1099 form on a tax form that'll tell you what to do and where to put it.
Bridget: Absolutely. And there's an option with I bonds, I believe, that if you wanted to pay tax on them every year instead of when you sell them, that you can, but you have to figure it out every year for yourself, which seems like a lot.
John: Yeah, that doesn't seem best. When you can avoid paying the taxes until you cash out, I'm not sure why somebody'd want to do that. If a viewer's got an idea, we'd love to hear what your thoughts are as to why it might make sense for you to pay taxes on an annual basis. That certainly wouldn't be my first choice.
Bridget: Yeah. And to me it seems like one of the major advantages, one of the reasons to buy I bonds is that you don't have to pay tax until you cash them out. The other thing is that it was a decent amount. It was a good investment, I would say.
John: Yeah.
Bridget: But that means that if I didn't do this step, and I just decided not to put this amount on my tax return, I would inevitably get a nasty gram from the IRS. And you know what happens when you get an nasty gram? Your blood pressure goes up.
John: I was just going to say that.
Bridget: You get stressed out, you get in fight or flight mode. That's me, and I get things from the IRS all the time. For some reason, the IRS can't seem to get my business address correct. And so, they're constantly sending me letters about my address. Yet my blood pressure goes up every time.
John: Let's talk about the taxes. It’s interesting. Normally we talk about, well, how do we manage the taxes and stuff, but we just spent this time talking about how you even get the information, because it's not self-evident. It doesn't necessarily show up on your statements. You get the check; you get the deposit. Now you've got your 1099. Where does that go on the tax return? And what should we be expecting when it comes to paying taxes?
Bridget: This one is kind of interesting, because it goes on your Schedule B, which is the interest income, but it's not subject to State tax. Illinois is not going to tax it. Illinois’ tax is 4% so I can say that that's nice. I save a bit on paying tax on the interest to Illinois. So that means I got to put it in my software correctly and double check to see if this got subtracted out to my state return.
John: Yeah. Great point.
Bridget: And I'm not going to guarantee that all states don't tax it, but I’m pretty sure.
John: That's my understanding.
Bridget: Yeah.
John: As we talk about it, first of all, we got to figure out how to get the gosh darn thing right and then get it to your tax preparer. If you do your own taxes, make sure it goes in the right spots. So some of the key things to think about, like how do we know if this gets done right? And this is one of the things when it comes to taxes, we see people all the time that struggle with this. It's my responsibility as the taxpayer, not the person that does my tax return. My job as the payer to know to say that it's right. So we're looking on Schedule B for the interest. Schedule B is the place where we'll see interest from my bank account, if I have CDs, if I've got a Schwab account or a Fidelity account.
Bridget: That has interest.
John: Right. It's got interest paid out. So we'll see maybe three or four or five line items on there. And what we're looking for on that, when you look at your tax return, is…
Bridget: US Treasury Direct.
John: Right. Is it reported on that form? Does that show up? Maybe I made a couple thousand bucks in interest, depending on how much I cashed out and things. And then that's included in federal income. I want to make sure that I'm paying my fair share of tax in that or else the IRS will come back with a nice love letter to me. But then you've got to then take a look at the State return and go, “Listen, my income was this on the federal, I expect on the State side for it to be that much less.”
Bridget: Yeah. There should be some subtraction. And generally, it's in one line.
John: Right. And you expect that the tax software, if you do it yourself or the tax preparers have those things, usually the answer is yes.
Bridget: But if you’re doing it yourself, you have to take a look at that. You want to be mindful when you're putting it in, because it's not a no brainer. You have to click an extra box or two…
John: to make sure that it goes in the right spot.
Bridget: Yeah. And to make sure it's taken off the right state.
John: And I'll say, from what I've seen from a professional tax preparer, you've been on that side of things doing hundreds and hundreds of returns. Hey, those folks are really good, but if they forget to click the box, it's up to you to make sure that you're, number one, paying the right amount of tax on the federal side, but number two, that you're not overpaying on the state side of things by being smart about that and being proactive.
Bridget: The other thing is that, what if you say, “Oh, I forgot. I already filed my tax return. I didn't put it on.”
John: “I didn't think about it, and it didn’t show up on my form.” I mean, great. What do you do then?
Bridget: Well, first, if you filed it with your tax preparer, you can ask them to put it on for you. And then if you forgot and it's before April 15, you're going to need to look into this to see if you can just file an amended return to just add it. Because that's ultimately what you're going to need to do. But I don't know if at this point before April 15, if there's another option right there. And if you've got a question on it, I'll look it up if you put it in the questions, if anybody has gone down this path. But after April 15, you just file an amended return and put it on there and then pay the tax. And that's a 1040X.
John: Yeah. Right. So I think that's a great place to wrap things up in talking about I bonds, paying the taxes, and reaping some of the benefits of the things we've been talking about for the last couple of years. With that, I'm John Scherer and I own a fee-only financial planning practice in Middleton, Wisconsin.
Bridget: And I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois. We're both proud members of the Alliance of Comprehensive Planners. You can check that out at acplanners.org. We're fee-only, tax-focused financial planners all over the country. John and I are both taking clients, but if you prefer somebody in your area, you can check out acplanners.org.
John: And don't forget, hit that subscribe button.
At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.