We decided to purchase a Savings Bond as a gift for a friend’s baby. I went into the bank yesterday and they wanted a social security number on the form.
Obviously I don’t have baby’s SSN. “Then you can put your own! Of course whenever the person cashes it, you’ll have to pay tax on the interest income”.
Wha???
Is it true, that you can’t buy a Savings Bond w/o a SSN? I would think the real issue with that would be when it’s cashed, they’d just have to get the SSN then. I know we received several bonds as gifts for our kids, from relatives who certainly didn’t have my kids’ SSNs. Some of those relatives are now quite deceased and the IRS would have a hard time getting taxes from them!!
I’m hoping that bank was just incorrect and I could go to some other bank to purchase the bond.
Nope. Your bank is right. You need a SSN to purchase a U.S. Savings Bond. You can purchase one using your own SSN and then reassign it to the kid after he gets an SSN. Or, cash it at maturity and pay the taxes yourself as your bank says.
There is a lot of good information around the web about Savings Bonds
Here is some info that I think answers your question. Basically, the person who is the owner of the bond, when he or she redeems it, will pay the tax on the interest. Just because your SSN is on the bond to register it, you should not need to pay the tax.
These days, a baby is going to need a social security number pretty soon anyway, if his parents intend to claim him as a dependent on their federal taxes.
You need an SSN. When the instruction is issued to purchase a bond, the SSN provided is compared against the name given. If they don’t match, the treasury won’t issue the bond.
My folks bought many savings bonds for me as custodial bonds. They were mine and I had to pay any taxes on them at my tax rate. Of course, they set it up so that the interest would be taxed yearly, instead of at redemption. Meaning that I effectively paid little to no taxes on the bonds over the last couple decades, even when they were cashed. That’s the way the OP should do it.
Interesting (sorry :)) - I didn’t realize that was even an option.
Thanks for all the replies. I did wind up going by the bank this morning and purchasing the bond. Screwed up 2 different forms before I got it right, because I didn’t realize whom I should list as “owner”, “send to”, “co-owner/beneficiary”. The first one I filled out, the poor kid would have had to wait until I died before he could collect
I was wondering what they’d do if I just put in a fake SSN. Per UncleBeer, that wouldn’t have been a good idea so I’m glad I didn’t do it.
Oh well - if the IRS comes after me for failing to declare 25 dollars in interest somewhere down the line, I’ll know the family forgot to provide their own SSN! :smack:
