Postdating a Check: It’ll Cost You

Q. Can a personal check be cashed even if the person signing it has postdated it? I was given a check in mid-March that had an April 1 date on it. Should the bank have accepted it? D.A .

A. Practices may vary among banks, so you should check with yours to be absolutely sure of its procedures.

However, Bank of America, California’s largest bank, says it accepts checks regardless of the date they carry--with one key exception: The bank offers its customers the ability to purchase a “postdating order” under which the bank will delay payment on a postdated check. The bank charges $10 for this service, available in person or by phone.

Essentially, the order acts much like the flip side of a “stop-payment” order. The bank simply withholds payment on the check until the date specified by the check writer. (Under a stop-payment order, the check is essentially voided for all future payment.)

Unless you purchase a postdating order, Bank of America says it is allowed under the state Uniform Commercial Code to honor all legally drawn checks presented to it for payment regardless of the indicated date. Even if you write on the check that it is “void until” a certain date in the future, your instructions will not be honored by B of A without a postdating order. The bank notes that it also may not honor instructions that some businesses print on their checks, such as “not good after 60 days” or “not good for less than” a certain amount. Again, these orders require specific bank approval for which the bank may demand a fee.

Who Is Eligible for College Saver Bonds?

Q. Can you tell me more about the College Saver savings bonds and who is eligible for the tax breaks they carry? I am concerned that they are not as attractive as they once were. A.L.B .

A. College Saver bonds are technically the same as any Series EE U.S. savings bonds, with two key exceptions:

* The bonds must be registered in the names of the parents upon their purchase.

* When the bonds are redeemed, the family’s adjusted gross income cannot exceed federal maximum limits in order for the bond proceeds to be free of federal tax. (The bonds are already free of state taxes for all purchasers.)

When they were introduced several years ago, the bonds were immediately hailed as a great deal for upper-middle-class taxpayers because the income ceilings were, relatively speaking, quite high.

In fact, at their peak last year, full tax breaks on bond proceeds were available to couples filing jointly with annual adjusted gross incomes of up to $68,250. The breaks were gradually phased out for higher incomes, ending completely at $98,250. For individual filers, total tax breaks were available for those with annual adjusted gross incomes of up to $45,500. The breaks gradually declined, ending at $60,500.

Until this year, the income ceilings on the College Saver program had steadily risen. However, this year, the government quietly scaled back the limits by $4,300 for individual filers and $6,400 for couples filing joint returns. Why? To reduce the number of upper-income families eligible to use them and increase tax revenues.

For 1995, full tax breaks on bond proceeds are available to couples filing jointly with annual adjusted gross incomes in 1994 of up to $61,851. The breaks gradually phase out and end at $91,850. For individual filers, total tax breaks are available for those with annual adjusted gross incomes in 1994 of up to $41,201. The breaks gradually decline, ending at $56,200.

In addition, bonds sold after May 1 no longer carry a guaranteed minimum interest rate. (The minimum remains 4% for bonds sold before that date.) Instead, the rate paid during the bond’s first five years is set at 85% of the rate paid on six-month Treasury notes. (Currently this rate is 5.25%; it will be reset in November and every six months after that.) Bonds held for more than five years will earn interest at the rate of 85% of the average rate paid by Treasury notes with five years left to maturity.

For more information about savings bonds and the College Saver program, write for the free brochure “U.S. Savings Bond Investor Information,” available from the Federal Reserve Bank of Kansas City, P.O. Box 419440, Kansas City, MO 64141.

No Problem in Transfer to IRS-Approved Plan

Q. I participate in a 403(b) plan and want to transfer my account to another annuity not included on my employer’s list of approved funds. Although I know I am permitted to make the transfer, I am concerned about the requirements governing the reporting of this move. What are they? -- B.A .

A. You should ask for a trustee-to-trustee transfer of your funds from one account to another. This is handled by representatives of the plans involved. The transaction is reported to the Internal Revenue Service by the plan sponsor, your employer. The plan you are joining should make all the required reports about the annual earnings of your annuity.

You shouldn’t encounter any difficulties with your transfer if your new annuity program has IRS approval; be sure to check before making any move.