Tax Help: Savings Bond Interest

This is one in a series of tax questions from readers answered by local members of the California Society of Certified Public Accountants, to help with your 1999 and 2000 tax issues.

Q: In 1990, I decided to claim the interest on my savings bonds every year (before cashing them in). I did this for five years and then completely forgot until this year. Should I pick up again with claiming the interest for the last four years that I haven’t yet claimed, or wait until I cash them? I already paid taxes on about $1,500 that I don’t want to lose. What do you suggest?

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A: A taxpayer on the cash basis of accounting--and most individuals are on the cash basis--may elect to treat the annual increase in bond values as income each year. In your case, you did this from 1990 to 1994, recognizing and paying taxes on about $300 in interest income each year. Normally, once you make an election like this, you are bound by it, so you should file amended tax returns. Copies of your prior tax returns and the amended returns should be retained to establish your reporting of the interest when you do cash in the bonds.

--Leonard Miskel, CPA, Ventura

To find a certified public accountant, visit https://www.calcpa.org. Questions and answers will also be posted on The Times’ Web site at http://161.35.110.226/taxes.