7683 / Can a taxpayer change the method of reporting interest earned on United States Savings Bonds Series E, EE or I after an initial election is made?

Ordinarily, an election made by the owner of an E, EE, or I bond to report interest annually applies to all E, EE, and I bonds then owned or subsequently acquired.¹ However, a taxpayer who reports interest annually may elect to change to deferred reporting with automatic consent of the IRS, provided certain requirements are met. To obtain automatic consent for the taxable year for which the change is requested, the taxpayer may file a statement in lieu of Form 3115.² The statement must be identified at the top as follows: “CHANGE IN METHOD OF ACCOUNTING UNDER SECTION 6.01 OF THE APPENDIX OF REV. PROC. 2002-9.” The statement must set forth:

(i) the Series E, EE, or I savings bonds for which the change in accounting method is requested;

(ii) an agreement to report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest; and

(iii) an agreement to report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of any interest income previously reported in prior taxable years.

The statement must include the name and Social Security number of the taxpayer underneath the heading.³ The change is effective for any increase in redemption price occurring after the beginning of the year of change for all Series E, EE, and I savings bonds held by the taxpayer on or after the beginning of the year of change.⁴ The taxpayer must attach the signed statement to his or her tax return for the year of the change, which must be filed by the due date (including extensions).⁵ (Alternatively, instead of filing the statement, the taxpayer can request permission to change from deferred reporting to annual reporting by filing Form 3115 and following the form instructions for an automatic change.) If the taxpayer is precluded from using the automatic consent procedure under Revenue Procedure 2002-9, above, the taxpayer must file Form 3115 in accordance with the regulations.⁶

Taxpayers may switch from deferred reporting to annual reporting in any year without permission; however, an election under Revenue Procedure 2002-9 may not be made more than once in any five-year period.⁷ The year of change is included within the five-year prohibition regarding prior changes.⁸

1. IRS Pub. 550.