At Betterment, we receive a lot of questions from customers about filing taxes. While we cannot provide tax advice (you should consult a tax professional), taxes are an inevitable part of the investment process. We do everything we can to make tax return preparation as efficient as your overall experience with us. Here’s how we do it.

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Everything In One Place

Tax considerations for investments require a lot of information—you need to keep track of dividends, cost basis, and realized capital gains and losses, to name a few things. Betterment does this for you and provides all relevant tax documents, available in early February, in a simple-to-read format.

Here is an overview of all the documents that Betterment provides (the forms you receive will depend on your account type).

  • Form 1099-B: This form reports to the IRS all the gains and losses in your account as a result of sales made during the year. Securities are sold whenever you make a withdrawal or change your allocation, and when we assess our management fee. This form must be included with your tax return if you have any gains or losses from sales. Note: Your 1099-B may be quite long if you have enabled Tax Loss Harvesting+ in your account, or if you have frequent allocation changes or withdrawals. This is to be expected, as the form reflects every sale you have made inside your portfolio for the year.
  • Form 1099-DIV: This form reports to the IRS all dividends you’ve received, and it is only required if the dividends amount to more than $10 over the course of the year.
  • Form 1099-R: This form is only provided in your IRA tax statement if you have an IRA and made a distribution from it in 2014. A distribution occurs when you make a withdrawal, convert a traditional IRA to a Roth IRA, or in the case of IRA recharacterization.
  • Form 5498: This form details any IRA contributions you’ve made for the 2014 tax year. We report this information to the IRS, but you don’t need to file this form (it’s for your records). Because contributions for 2014 are permitted up to April 15, 2015, this form will be made available separately in May.

Starting in early February, click on the Activity tab in your Betterment account, where you’ll find  PDF versions of your tax statements that include all the forms that are applicable to your account. We’ll also notify you of their availability when you log in.

To accommodate your tax planning, we generate these documents in-house so we can get them to you as soon as possible. As a result, we provide them earlier than many others in the financial services industry.

Integrated with Tax Software

You may also automatically import your documents into TurboTax, H&R Block Tax Software, or TaxACT. Import your information directly into any of these programs by entering your Betterment email and password, and the service will automatically download and calculate your tax information.

If you are unable to automatically import your tax forms into your tax software because of the number of transactions documented (this could be the case if you have enabled Tax Loss Harvesting+ in your account), the IRS allows you to report the summary information on your electronic tax return and send a paper copy of your statement with Form 8453 to the IRS after your tax return has been accepted. You can get more information from the IRS here.

Tax Tips for Filing

If you work with an accountant to file your taxes, he or she may ask for your Betterment account number. For taxable accounts, your account ‘number’ is the email address associated with your Betterment account. For IRAs, we provide the account number on your tax form.

  1. Don’t forget to report any carryover capital losses from 2013 on Schedule D of your 2014 tax return.
  2. Take state and local exemptions for municipal bonds. If you held municipal bond ETFs, note that a portion of dividends paid by municipal bond ETFs including MUB, CMF, NYF, and TFI may be exempt from state and local tax. The applicable rules for exemption vary by state—consult your tax advisor. Please refer to the 2014 tax information published separately by iShares and SPDR.
  3. Max out your IRA contributions. Traditional IRA contributions come from your pre-tax income and contributing to your IRA may lower taxable income. You can write off 2014 traditional IRA contributions and potentially lower your tax bill (or increase your refund) if you make those contributions before filing your 2014 taxes.
  4. Time your filing. Once you have your paperwork, you can fully figure your taxes before they are ready to submit. Alex Benke, CFP®, Betterment’s Director of Advice Products, recommends timing your return to the IRS based on whether or not you will be getting a refund. “File immediately if you will be receiving a refund,” Benke said. “Delay filing until close to April 15 if you owe the IRS money.” The rationale? That ‘loan’ you have from the government is interest-free, so no need to pay it off early.

Note that any IRA rollovers and conversions count for the calendar year in which they are performed—the April 15 extended deadline does not apply to these activities. If you haven’t already, consider rolling over an IRA or old 401(k) to Betterment—we make the traditionally complicated process simple and efficient.

Tax-Efficient Investing, Year-Round

At Betterment, we keep your tax bill low through advanced features, such as Tax Loss Harvesting+, Tax Impact Preview, TaxMin cost basis accounting, automated dividend, reinvestment, and more.

As always, we are available seven days a week to answer any questions you have about Betterment tax documents or your Betterment account. Happy filing!

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Betterment is not a tax advisor, and this article should not be considered personal tax advice. Contact a qualified tax advisor to understand your personal situation.