I'm praying we get a tax refund this year.

Normally I try to plan ahead so that, come tax time, we just about break even. I never liked the idea of getting a big refund because I felt it was like giving an interest-free loan to Uncle Sam.

But this year it sure would be nice to get a little back. With three kids under the age of five — one of whom was born in June — we're finding life is more expensive than it used to be. I would like to expand our cash "safety net" so if the unexpected happens, we can get by. If we do get a refund, I'm putting it into our savings account and I'm not touching it. And this year, there's a new option.

When you file your 2009 tax return, you can opt to put all or just a portion of your refund in savings, including IRAs. This has been allowed since 2007. But this year, Uncle Sam has added another option – you can purchase an inflation-adjusted savings bond, also called an I Bond.

I Bonds are appealing because they let you save without tying up your funds in a retirement account. Plus, I Bonds have been showing great returns lately relative to other low-risk investments. Currently their rate is 3.36 percent through April 30.

I Bonds are sold in $50 increments up to a max of $50,000 with an interest-earning period of 30 years. While you're required to own the bond for at least one year, there are penalties if you withdraw your funds before five years; namely, you forfeit the three most recent months' interest.

Another benefit of I Bonds? They're exempt from state and local income taxes. However, they are subject to state and local estate, inheritance and gift tax.

You'll have to fill out Form 8888 to purchase the bonds with your refund. And you can choose to use only a portion of your refund to buy I Bond and put the rest in your checking, savings or IRA accounts. It couldn't be easier.

Learn more at www.treasurydirect.gov.


Northwest resident Romi Carrell Wittman is a Tucson-based communications professional who writes about technology and personal finance.


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