Refund used to purchase series I savings bonds?

So, it sounds to me like the I Bonds are limited to $10,000 per person and then another $5,000 per return, and not per person, so a MFJ return could only do $25,000 total. If it's per return, could MFS taxpayers each do $5k purchase on each of their separate returns for a total of $30k max, or is that max still $25,000?

Rate for bonds purchased through 10/22 is 9.62%

https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm#past

If it's per return, could MFS taxpayers each do $5k purchase on each of their separate returns for a total of $30k max, or is that max still $25,000?

MFS $5K each.

Adjust every six months based on the inflation rate, I think they also have a minimum rate guaranteed - also the kicker is I believe you have to keep for 5 years or there is an adjustment to what they pay. The above was per a glance by me a couple of weeks ago.

The inflation interest rate is adjusted twice a year, May and November, based on the inflation rate.
There is a fixed guaranteed rate which is in effect for the life of the bond, fixed when the bond is purchased. The current fixed rate is zero%. The rate paid is the combined rate of the fixed portion plus the inflation portion.
The bond cannot be cashed for one year except in case of a federally declared disaster.
If cashed after less than five years the interest for the last three months is forfeit. After five years there is no penalty.

Isn't there something odd on how their taxable interest is reported too, an election of some kind? Or am I thinking of a different federal bond?

The default is that the interest is taxable when the bond is redeemed. You can elect to pay tax on the interest as it accrues.

That's what I thought. We had a final return/estate for somebody with a ton of these bonds that had never been redeemed, and that ended up with a big slug of taxable interest all at once. I want to say that some or all of it ended up on the estate return where it generated a fair amount of tax, and it was another one of those 'oh, we needed to make distributions? too late for that!' estates where we didn't get informed of anything until it was too late to fix.

It seems there is a maximum of $15,000 on Form 8888. I have a client with a $22K refund. He is married with 2 kids, but we can't find a way to list all 4 at $5K each. So we have him, his wife, and one 1 child at $5K each and the balance being refunded.

You are limited to $5k for the tax refund. If client wants to buy more, he needs to set up accounts at Treasury Direct. $10k per person limit.

Can children even buy them that way? I thought it was TP & spouse only.

I'm not clear which method you are talking about. You can get $5k refund per return and another $10k by setting up a TD account. It is per person, so you can set up accounts for the kids. Maybe you could even file a no-activity return for each kid, pay in $5k, and buy a bond with the refund. I don't see why that wouldn't work.

It seems there is a maximum of $15,000 on Form 8888. I have a client with a $22K refund. He is married with 2 kids, but we can't find a way to list all 4 at $5K each. So we have him, his wife, and one 1 child at $5K each and the balance being refunded.

I'm curious to know if there is a workaround for this as Form 8888 seems to only have 2 lines for for each non-spouse. What if you want to buy for more than just 2?

Are I series bonds actually decent investments? I've never suggested this to a client, and finding historical information on I bonds cumulative performance wasn't easy when I looked a couple of years ago.

EDIT: Never mind, I found the historical chart which gives me at least some idea. And with 3 month Treasuries at ~5.38% it seems like some annoying hoops to jump through for the same yield.

Are I series bonds actually decent investments?

I'm not an FA but think these could certainly have a place as part of a larger portfolio. Certainly not for everyone, it depends on the client's timeline and risk tolerance. I personally have some and like the "cookie jar" deferred interest (i.e. "I have a low income year so I'll pick a bond to redeem so I can pay tax in a lower bracket now instead of a higher one later.") IMO the only reason to jump through the "tax refund" hoops is if you've already maxed out the $10K per person limit on TreasuryDirect. Otherwise this is a bit of a pain.

IMO paper bonds are mostly symbolic (as opposed to TreasuryDirect bonds). I remember getting one from my grandmother when I graduated high school. So if you want something tangible that fits into a greeting card, this is an option. I gotta think there are plenty of better options today but to each his/her own...

Suppose the taxpayer does not have enough refund, let us say, he owes 1000. Can I file an extension and pay 6000, and then when I file the actual return, buy the 5000 paper bond. Is this a fair play?

Absolutely. I can't see how the IRS would come up with a rule to capture "intentional" overpayments no matter how flagrant the facts. The possibility of "abuse" (if an "intentional" overpayment can be said to be an abuse), is baked into the $5,000 limitation. I see no ethical issue.

Are I series bonds actually decent investments? I've never suggested this to a client, and finding historical information on I bonds cumulative performance wasn't easy when I looked a couple of years ago.

EDIT: Never mind, I found the historical chart which gives me at least some idea. And with 3 month Treasuries at ~5.38% it seems like some annoying hoops to jump through for the same yield.

I'm pretty happy with the ones I have earning 7.5%, and for a time were up over 9.5%. I know those were peaks, but that's pretty nice for guaranteed tax deferred money.

TBH, I don't see much of a use case for I bonds.

If you're young and don't need the money for decades, a low cost S&P 500 etf is going to beat the pants off I bonds. I bonds are straight interest. They don't compound.

If you're young and need the money soon, a money market, high yield savings account or T bills are easier to deal with and, in the case of T bills, less hassle to liquidate.

If you're in or near retirement, you're probably looking for income, not deferred income.

I'm also not a fan of Treasury Direct, so that might be coloring my vision a bit.

I'd be interested in statistics surrounding what percentage of people are still holding their I Bond after 1 year, 2 years, 3 years, etc. While that may be influenced by the general inability to hold a liquid investment long-term due to impulse, I suspect a lot of people are drawn to I bonds because of the interest rate, but don't stick around long because there are truly greener pastures out there.

I bonds are straight interest. They don't compound.
They compound semi-annually.

I stand corrected, thank you.