How do I handle previously reported savings bond interest in FreeTaxUSA? TurboTax option missing!

I'm in a weird situation with my taxes this year and FreeTaxUSA is giving me a headache. I cashed in some US savings bonds that I've had for years and got a 1099-INT form. The thing is, I've been diligently reporting and paying taxes on the accrued interest each year as it built up (yeah, I'm that person). Now according to the IRS Publication 550 (page 17), I'm supposed to enter the full interest amount from the 1099-INT on Schedule B, Part I, Line 1, but then subtract the interest I've already paid taxes on in previous years. Basically, I shouldn't have to pay taxes on that money twice! But when I try to do this in FreeTaxUSA, there doesn't seem to be any option to subtract previously reported interest. It just wants me to report the full amount from the 1099-INT which would mean I'm double-taxed on that interest. Has anyone run into this issue? Is there some hidden menu I'm missing? I've been poking around for hours and getting nowhere. I don't want to switch tax software this late in the game but might have to if FreeTaxUSA can't handle this seemingly basic situation.

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19 comments

Jordan Walker

•8M

This is actually a common issue with several tax software programs, not just FreeTaxUSA. The solution is there, but it's not obvious. In FreeTaxUSA, after you enter the 1099-INT information, look for an option called "Interest Income Adjustments" or something similar. It might be on a different screen than where you initially enter the 1099-INT data. Within that section, you should find a field for "Previously Taxed Interest" or "Interest Previously Reported." That's where you'll enter the amount of interest you've already paid taxes on in prior years. If you can't find this option, try going to the "Miscellaneous Adjustments" section after entering all your interest income. Sometimes the option is buried there instead. Keep in mind that you'll need documentation showing how much interest you previously reported over the years, as the IRS may ask for this if you're audited. Your past tax returns should have this information.

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Jordan Walker

•8M

For H&R Block software, the process is somewhat similar but the navigation is different. After entering your 1099-INT, look for a section called "Income Adjustments" or "Other Income Situations." There should be an option specifically for savings bonds where you can indicate previously taxed interest. The software will automatically generate the proper entries on your Schedule B - you don't need to file any additional forms beyond what the software creates. However, I strongly recommend keeping a separate worksheet or document for your own records that shows your calculation of previously taxed interest. This isn't submitted with your return, but it's important to have on hand in case of questions from the IRS.

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Elijah O'Reilly

•8M

I was in this exact situation last year and nearly pulled my hair out trying to figure it out. I eventually discovered taxr.ai (https://taxr.ai) which saved me a ton of headache with my savings bonds. I uploaded my 1099-INT and my previous year's returns, and their system immediately flagged the potential double taxation issue. They have a specific tool that helps calculate exactly how much interest you've already paid taxes on, which was super helpful since I had been reporting interest for about 7 years and honestly couldn't remember exactly how much I'd already reported. Their software created a perfect Schedule B with the correct adjustments that I could then use to manually enter everything correctly in FreeTaxUSA. The whole process took maybe 15 minutes instead of the hours I spent trying to figure it out on my own.

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Elijah O'Reilly

•8M

The security is actually really good - they use bank-level encryption and delete your documents after processing. I was initially hesitant too, but their privacy policy clearly states they don't keep your documents longer than needed for analysis. The way it works with FreeTaxUSA is that taxr.ai gives you the exact figures and line items you need to enter. So while it doesn't directly integrate, it tells you precisely what numbers to put where in FreeTaxUSA. In my case, it showed me exactly how to find that buried "Interest Income Adjustments" section the first commenter mentioned, and exactly what amount needed to go there. It basically gives you step-by-step instructions specific to your situation.

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Amara Torres

•8M

Just wanted to update - I tried taxr.ai after asking about it and I'm genuinely impressed. I've been accumulating savings bonds for 12 years and reporting interest annually, so I had a mess of paperwork. The system actually identified a mistake in my previous calculations where I had accidentally double-counted some interest from 2017. I would have never caught this on my own. It generated a detailed report showing exactly how much interest I'd already paid taxes on ($3,287.42) versus what was on my 1099-INT ($4,125.89). The step-by-step guide for FreeTaxUSA was super clear - turns out I needed to go to "Adjustments to Income" and then "Other Income Adjustments" to find the right field. Would have never found that on my own! Definitely recommend for anyone dealing with savings bonds or other complicated interest reporting situations.

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Mason Kaczka

•8M

If you're still struggling with this after trying the software suggestions, you might want to just call the IRS directly. I had a similar issue last year (but with TurboTax) and ended up spending 3 days trying to get through to an IRS representative. I finally discovered Claimyr (https://claimyr.com) which got me through to an actual IRS agent in about 20 minutes. They have this system that navigates the IRS phone tree and holds your place in line, then calls you when an agent is available. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with walked me through exactly how to handle previously reported savings bond interest in my tax software. Turns out there's a specific worksheet they recommend using that makes it all clear. Saved me a ton of stress trying to figure it out on my own.

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Mason Kaczka

•8M

Yes, it absolutely works. The trick is they use some kind of technology that calls continuously and navigates the phone tree, then it holds your place in line. When they finally reach a human, they connect you. I was skeptical too until I tried it. The IRS is definitely reachable - just not easily by individuals who can't sit on hold for 3+ hours. The IRS agents themselves are actually quite helpful once you get through to them. In my case, the agent looked up the exact guidance for savings bond interest that had been previously reported and walked me through how to enter it correctly in my software.

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Evelyn Xu

•8M

I need to eat some crow here. After dismissing Claimyr as a probable scam, I got frustrated enough with my own tax situation to give it a try. I'd been on hold with the IRS for over 2 hours and got disconnected TWICE yesterday, so I figured what the heck, might as well try this service. To my complete shock, I got a call back in about 30 minutes saying they had an IRS agent on the line. The agent was incredibly helpful and explained exactly how to handle my savings bond situation in FreeTaxUSA. For anyone curious - after entering the 1099-INT information, you need to go to "Other Income" section, then find "Interest Income Worksheet." There's a specific line for "U.S. Savings Bond Interest Previously Reported" where you can enter the amount you've already paid taxes on. The agent confirmed this is the correct way to handle it. I can't believe I wasted days trying to figure this out when I could have just called and asked. Lesson learned.

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