How to Buy Treasury Securities by Mail

QUESTION: I need information regarding the purchase of Treasury bonds, bills and notes. At what locations can they be bought? Is there a fee? Are there specific times during the year when they are for sale? Do you pay federal taxes on them? Do you pay state taxes on them?--A. H.

ANSWER: Treasury securities, the generic name for bonds, bills and notes, can be purchased from several outlets. Banks and brokers sell them, but often charge a fee of as much as $25 per security. Perhaps you might be more interested in making your purchase directly from the U.S. government, which charges no fee.

Bonds, ranging in maturity from 10-30 years, are available in $1,000 increments to a maximum of $1 million from the Federal Reserve Bank or any of its branches. The Los Angeles branch is located at 950 S. Grand. You may also buy bonds by mail through the Bureau of the Public Debt, Washington, 20239. Personal checks are accepted. Bonds are traditionally auctioned four times a year--in February, May, August and November--and the interest rates paid by the bonds are set then.

Treasury bills and notes are shorter-term instruments than bonds. T-bills, as they are known, are sold in 3-, 6- and 12-month maturities and are available in $5,000 increments from a minimum of $10,000 to a maximum of $1 million. Three-month and 6-month bills are auctioned every Monday; 12-month bills are sold once a month.

Treasury notes come in a variety of maturities and amounts. Two-year and three-year notes are available in increments of $5,000 from a minimum of $5,000 to a maximum of $1 million. Four-, 5-, 7-, and 10-year notes are available in increments of $1,000 from a minimum of $1,000 to a maximum of $1 million. Two-year notes are sold monthly; the rest are sold quarterly.

You may buy any of the bills or notes directly from any Federal Reserve branch, or by mail. Before buying through the mail, you are well advised to establish a “Treasury Direct” account with the Federal Reserve. For appropriate forms, Southern California residents may write to the Federal Reserve at P.O. Box 2077 Terminal Annex, Los Angeles, Calif. 90051. Mark your envelope “Attention: Securities Information.” You may also obtain a detailed auction schedule by writing to the same address.

Once you have opened a mail-order account, you may order T-bills or notes by sending a check payable to the Federal Reserve Bank. Treasury bill purchases must be accompanied by a cashier’s check; for Treasury notes, a personal check will suffice. Again, Southern California residents would reach the local Reserve branch at P.O. Box 2077 Terminal Annex, Los Angeles, Calif. 90051. Certified mail is recommended to ensure that the order arrives at least one day prior to the auction.

Interest paid on Treasury securities is exempt from state and local taxes but not federal taxes.

Few Are Eligible to Choose Own Tax Year

Q: I don’t quite understand the optional taxable year section of my income tax form. May I pick the beginning and end of my own tax year? This would be helpful since my last paycheck for 1989 covered only until Dec. 17. Can I just make my tax year from Jan. 1 to Dec. 17? Also, I was married on Dec. 31. Must I file as married, or--if my tax year ends Dec. 17--may I file as a single individual? It would be nice to avoid the “marriage penalty.” --A. R.

A: For a variety of reasons, which we’ll detail below, you are probably stuck with the traditional Jan. 1 to Dec. 31 tax year like the rest of us. Further, because you were married as of Dec. 31--and regardless of the tax year matter--you are required to file your tax return as married.

According to our tax experts, the provision for choosing the taxable year is meant for businesses, not individuals, unless you can persuade the Internal Revenue Service that you have a pretty good reason for deviating from the pack. And even if you could persuade the IRS, you would have to select the dates of your tax year the very first time you filed your income tax return. Finally, your tax year must end on the final day of a month.