How-To Client taxes
IRA recharacterizations
In certain cases, a client may need to reclassify their IRA contributions. This can happen if they contributed to a Roth IRA, then later realized they made too much money to do so. A recharacterization changes one’s contributions (plus the gains or minus the losses attributed to them) from a traditional IRA to a Roth IRA, or from a Roth IRA to a traditional IRA.
You can complete most Roth IRA to traditional IRA recharacterizations on behalf of your clients by selecting Transfers > Other ways to transfer > IRA Recharacterization.
Email support@BettermentAdvisorSolutions.com for help with traditional IRA to Roth IRA recharacterizations or recharacterizations that were originally made elsewhere and later rolled into Betterment.
IRA conversions
Roth conversions are a taxable event that allows clients to convert funds from a traditional IRA to a Roth IRA. These are often conducted as a part of a “backdoor Roth” strategy. More details on Roth conversions are available here.
Navigate to Clients > select client > Convert IRA to Roth.
When are tax forms released?
1099 forms issued by mid-February
Form 5498 is issued after the tax-filing deadline
What tax forms will my clients receive?
A 1099-B reports proceeds from selling stocks, bonds, or other securities. It is often put together with your 1099-DIV.
Available by
Mid-February
Who
Clients who have/had a Betterment taxable account and:
- their gross proceeds from selling shares are more than $20, or
- they had any amount of federal tax withheld.
A 1099-DIV reports dividend payments received and capital gains distributions from stocks you own. It is often put together with your 1099-B.
Available by
Mid-February
Who
Clients who had a Betterment taxable account that:
- received more than $10 in dividends, or
- used this account to pay any foreign or federal taxes.
Available by
Mid-February
Who
Clients who received a 1099-DIV. Although this is not an official IRS tax form, Betterment generates this form to help with filing. Although most customers will receive a Supplemental Tax Statement, a small subset of customers will not, because of various holdings that are not generally included in our main portfolio strategies at Betterment. If you did not receive a Supplemental Tax Statement and you need more help, please email support@BettermentAdviSorsolutions.com.
A 1099-INT reports interest payments received in your Cash Reserve account.
Available by
End of January
Who
Clients who have/had a Cash Reserve account and:
- received $10 or more in interest, or
- used their interest to pay federal taxes—because of backup withholding.
A 1099-R reports distributions from retirement accounts, such as IRAs and 401(k)s.
Available by
End of January
Who
Clients who have/had a Betterment IRA or 401(k) account, and in the previous calendar year:
- requested $10 or more in total, distributions from Betterment IRAs or Betterment 401(k)s,
- completed a rollover from a Betterment 401(k) to another retirement plan,
- completed a rollover from a Betterment IRA to an employer-sponsored plan, such as a 401(k) or 403(b),
- completed an indirect rollover (in a 60-day window) from a Betterment IRA to another IRA,
- completed a Roth IRA conversion
- recharacterized an IRA, or
- had any amount of tax withholding.
Please note: Your client will not receive a 1099-R for a direct trustee-to-trustee transfer from a Betterment IRA to an IRA at another institution.
If your client made annual or rollover contributions to their Betterment IRA, they will receive this form. It is for records only.
Available by
End of the month of the tax-filing deadline
Who
Clients who made annual or rollover contributions into their Betterment IRA in the tax year. Direct transfers into their IRA will not be reported, per IRS requirements.
- Your client does not need to send the 5498 to the IRS—we will report it for them.
- The 5498 is generated after the tax-filing deadline. It’s up to the client to self-report IRA contributions. The purpose of the 5498 is to consolidate what clients reported, vs. what their activity actually was.
Please note: Although Betterment is generally not required to issue tax forms that do not meet certain minimum proceeds, dividends, or interest requirements, taxpayers are still required by the IRS to report and pay taxes on any earned income. You can view dividends and interest history on the Activity page in the client’s account.
Additional resources
Contact our team:
support@BettermentAdvisorSolutions.com
(888) 646-2581 Monday–Friday, 10am–6pm ET
