Did you buy U.S. Savings Bonds decades ago? If you do, take a look at them before April 15 rolls around. Your bonds may have matured. That means they are no longer earning interest, and it also means you need to cash them in.

Check those maturity dates. Sometimes people hold U.S. Savings Bonds past the date of final maturity. That’s a problem. In fact, it’s a violation of IRS statutes. If you hold these bonds after the date of final maturity, it opens the door to a possible tax penalty and/or fine for you. IRS Publication 550 states that once that savings bond passes its final maturity date, the interest accumulated over the life of the bond must be reported on that year’s federal tax return.

What is supposed to happen. You are supposed to pay tax on a U.S. Savings Bond in one of two ways. Most bondholders choose to defer the tax until the bond matures. They redeem the bond and then report the interest through a 1099-INT form. Some choose to pay the tax annually prior to cashing the bond in, by reporting the increase in the value of the bond as interest each year.

What sometimes happens instead. People hold the bonds too long and have to pay a lump sum and sometimes penalties in light of what the IRS considers underreported unearned income.

So, what if you discover you’ve held a U.S. Savings Bond too long? Well, if it has been less than three years since your bond stopped earning interest, you may be able to file an amended federal tax return without being penalized. What if more than three years have passed since your bond earned interest? The sooner you cash it in and report the interest, the better. The longer you wait to cash in the bond, the longer it is not earning interest and the larger the penalty you could face.

Plan ahead and keep track. Savings bonds can prove quite useful to a retiree looking to improve cash flow. When you cash in a bond, or even multiple bonds, the “cash infusion” may help you put off withdrawing assets from another retirement account. Also, these bonds are exempt from state and local taxes.

You want to keep track of the maturity dates, the yields and the interest rates on your bonds, as that will help you to figure out what bond to redeem when.

A useful website. Do you own a Series E U.S. Savings Bond? You might want to check on its maturity date at savingsbonds.gov/indiv/tools/tools_treasuryhunt.htm, which provides records of most registered U.S. Treasury notes and bonds issued since 1974.

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