The IRS has announced that, "starting in January 2010, you can buy Series I U.S. Savings Bonds with a portion or all of your tax refund. Issued by the Department of the Treasury, Series I bonds are low-risk bonds that grow in value for up to 30 years." When taxpayers own these US Savings Bond, they earn interest and protect against inflation.

Buying savings bonds with your tax refund is simple and easy
Just tell your tax preparer you want to buy savings bonds with part or all of your refund! In any single calendar year, taxpayers can purchase up to $5,000 of I bonds under this program. If a taxpayer purchases bonds with their tax refund, the amount the taxpayers request must be divisible by 50.

If taxpayers don't buy I-bonds with 100 percent of their refund, they will need to have another account in which to deposit the remaining amount of your refund. Thus, for example, if a taxpayers refund is $280, they can direct $250 to I bonds and the $30 balance to a savings account.

Paper bonds will be issued in your name
According to the IRS, "when you purchase savings bonds with your tax refund, you will receive paper bonds, issued in your name. If you are married and filed a joint return, the bonds will be issued in your’s and your spouse’s name. You cannot designate a beneficiary under this option."

Your request will be processed in two parts
Part 1: Generally, a taxpayer will receive the bonds after they receive the remainder of their tax refund from the IRS. The IRS will process the portion of their tax refund that will not be used to buy savings bonds. This amount will be deposited into the account that the taxpayers designate.

Part 2: The IRS will forward a taxpayers request for Savings Bonds to the Treasury Retail Securities Site. It will take them up to three weeks to issue and send your bonds to you at the address that is shown on the taxpayers tax return. Taxpayers can call the Treasury Retail Securities Site at 1-800-245-2804 to check on the status of your bond issuance.

More about savings bonds
Series I bonds pay interest based on a combination of a fixed rate (currently .30%), which remains the same throughout the life of the Savings Bond, plus a semiannual inflation rate - currently 3.06%, which is updated each May and November.

The interest earned by purchasing and holding savings bonds is subject to federal tax at the time the bonds are redeemed. However, interest earned on savings bonds is not taxable at the state or local level.

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