FAQ: How do I cash a US savings bond, and do I have to pay interest on a bond?
Most financial institutions, (banks, savings & loan associations, credit unions) are authorized redemption agents designated by the US Treasury Department. However, some bonds may have to be submitted to a Federal Reserve Bank to receive payment. Please visit the US Treasury Department website at http://www.treasurydirect.gov for bond status and value calculators and other comprehensive information regarding US Savings Bonds.
Because US Savings Bonds are issued by the federal government you do not have to pay state tax or local taxes on the earned interest. However, all of the accumulated interest on US Savings Bonds is taxable in the tax year that they mature and must be reported on your tax return. You will receive a Form 1099-INT tax notice in the tax year that the US Savings Bonds are redeemed. Even if you do not receive a tax statement or Form 1099 you are still responsible for reporting all taxable interest income on your tax return. The IRS is notified electronically of all interest paid by financial institutions to bond holders. If you do not include your interest income on your tax return you will be notified by the IRS, usually by mail, of the amount of additional tax, interest, and penalties that you owe.
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