I want to use my tax refund to purchase $5,000 worth of I Bonds. I computed my taxes and have, in round numbers, a $1,000 refund due. Before I file, can I make an estimated tax payment for $4,000, bumping up my tax refund to $5,000, and then use the refund for I Bonds? Anything improper about that?
Answers
(As I indicated in my initial comment, I do not know whether filing for an extension is an advisable, or even viable, approach. But it might be worth exploring. And it might not.) Once again, thanks for your comment.
yes.
https://www.irs.gov/payments/pay-taxes-by-electronic-funds-withdrawal
"Up to four Form 1040-ES quarterly tax payments for TY 2021 may be submitted with the TY 2020 e-filed return."
Though it's not clear from reading that if you can do so separate from filing your tax return.
H&R Block suggest you can make estimated payments in the following ways:
https://www.hrblock.com/tax-center/irs/forms/estimated-tax-1040es/
"Apply your 2021 refund to your 2022 estimated tax.
Mail a check or money order with Form 1040-ES: Estimated Tax for Individuals.
Use the Electronic Federal Tax Payment System (EFTPS) to submit payments electronically. Visit www.eftps.gov or call 1-800-555-4477. You can make payments weekly, monthly, or quarterly. You can schedule payments up to 365 days in advance.
You can learn more about credit card options at www.irs.gov. You might be charged a convenience fee for using your credit card."
So maybe you can do it through the EFTPS system?
Note that payment is always separate from the filing of the tax return. My CPA tinformed me that the IRS separates its processing and collection functions to ensure good internal controls and prevent fraud. Regardless of your method of payment, the money always goes to a location that is different from the address to where the tax return is processed. Even if you use an online tax prep service, that service transmits the return electronically to a location that is different from the location where your money goes.
https://directpay.irs.gov/directpay/payment?execution=e1s1
In the dropdown box for Reason for Payment, select Extension. The next dropdown box, Apply Payment To, will be filled in with 4868. The final dropdown box, Tax Period for Payment, will be filled with 2021.
You can continue through the process.
You may wish to explore filing for an extension of time to file a 2021 income tax return, and including a payment with the extension request.
The current I bond interest rate is over 7%. So if you're able to buy your bonds prior to first of May you will earn that high rate for your first six months. The rate following the May first reset is today unknown. But inflation is very bad and no immediate relief appears in the cards between now and first of May. So it is reasonable to assume that, even following the reset, it will be a high, desirable interest rate. The real unknown is the rate following the November first reset. That is too far out to allow making of a decent guess. Bottom line, best case is I bond acquisition prior to first of May. That will give us at least a solid year of high returns in all likelihood.
The wrinkle comes because the IRS is so overwhelmingly backed up. I know for a fact they are still processing some 2019 return stragglers. And of course everyone is aware they are 24 million returns behind for 2020. So what's an I bond purchaser to do?
It is critical you file electronically and absolutely ASAP. That is your only chance. I filed electronically last week, for example, and I'm far from certain my bonds will be issued prior to first of May. But I did the best I could and fingers are crossed. You can only do your best. But do not dawdle. Time is NOT on your side in this matter.
My hope is by filing electronically I might have a chance. Most of those 24 million returns, as I understand things, are on paper. Electronically filed returns are processed faster provided you make zero errors. Any error which results in need for human intervention almost surely will push you past the May first reset. So file ASAP, file extremely carefully, and good luck.
If my bonds are issued after first of May it'll be a disappointment. But I can live with that outcome. It's a crapshoot. Sometimes you win, other times you do not. It's the IRS for goodness sake. There are no miracles.
The following IRS timetable was "Last Reviewed or Updated" on November 17, 2021. I do not know how accurate it was then, and I doubt it's gotten speedier. From:
"Now you can buy U.S. Series I Savings Bonds for anyone with your tax refund"
Your request will be processed in two parts
Part 1: Generally, you will receive the bonds after you receive the remainder of your tax refund from the IRS. The IRS will process the portion of your refund that you are not using to buy savings bonds. This amount will be deposited into the account you designate or sent to you in the form of a paper check. Go to Where’s My Refund? or call 800-829-1954 to see if Part 1 is complete.
Part 2: The IRS will forward your request for savings bonds to the Treasury Retail Securities Site. It will take them up to three weeks to send your bonds to you at the address on your tax return. You can call the Treasury Retail Securities Site at 844-284-2676 to check on the status of your bond issuance.
https://www.irs.gov/refunds/now-you-can-buy-us-series-i-savings-bonds-for-anyone-with-your-tax-refun...
