H&R Block will be among the tax preparation businesses that will be taking advantage of a new IRS initiative aimed at helping taxpayers build their nest eggs by allocating a portion of their tax refund toward the purchase of U.S. savings bonds.

President Obama announced the initiative in September (see Obama Aims to Increase Retirement Savings). According to a fact sheet distributed by the administration, taxpayers would be allowed to check a box on their 2009 tax return to have their tax refunds sent to them as savings bonds. The savings bonds would be mailed to the taxpayer. Taxpayers would be able to purchase bonds in their own names beginning in 2010 and to add co-owners, such as children or grandchildren, beginning in 2011.

Block, the largest tax prep chain in the U.S., announced last week that it plans to support the initiative this coming tax season. The option will be available at all of H&R Block’s 13,000 offices as well as through the H&R Block At Home and Best of Both online and tax software. The company recently announced that it was renaming its TaxCut software as H&R Block At Home for the upcoming tax season.

Beginning with the 2009 tax return, tax refunds can be used to purchase Series I U.S. Savings Bonds by completing the appropriate sections of the tax return, according to Block. Savings bonds will be mailed to taxpayers who choose this option in denominations of $50, $100, $200, $500 and $1,000. The bonds must be held for one year.

While there is no penalty for cashing the bond after five years, if cashed out sooner, the last three months' interest will be forfeited. Bonds will accrue interest for up to 30 years, are adjusted semi-annually for inflation, and pay compound interest. The current rate is 3.36 percent. A feature to add co-owners to the bond will become available in 2011. 

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