Taxes February 28, 2018

    The tax filing season is upon us. And if the mere thought of that annual rite makes you anxious and confused, you're not alone. A quote widely attributed to Albert Einstein states that "The hardest thing in the world to understand is the income tax." So you're in good company.

    Thankfully, just as Schwab Intelligent Portfolios is designed to make investing simpler and more efficient for you, it's also designed to help ease your potential tax filing headaches.

    Your tax forms are easily accessible on the Schwab Intelligent Portfolios website

    You can access your 1099 and other forms in just a few clicks by logging into your account, clicking "Statements and Documents" in the menu on the left and then clicking "Tax Documents." Each tax document will be listed here and can be accessed by clicking on each name.

    Schwab Intelligent Portfolios is designed for paperless distribution of most account forms and statements, so you will receive an email notification when various tax forms are available online.

    Just like with other investment accounts, your 1099-B form will include a consolidated list of all of the gains and losses in your account due to rebalancing and tax-loss harvesting trades throughout the year. Dividends and interest you've received over the course of the year can be found in the 1099-D and 1099-Int forms.

    Form Account type Description Expected notification of availability How you'll receive it
    1099 Brokerage accounts This form reports any income generated by your account, and may include IRS Form(s) 1099-B, 1099-DIV, 1099-INT, 1099-MISC and 1099-OID, depending on your situation. Email 1: early February Email 2: later February Log into your account online
    1099R Retirement accounts This form reports distributions from IRA and Roth IRA accounts. Mid- to late January Log into your account online
    5498 Retirement accounts This form reports your IRA contributions made by April 17, 2018. Mid- to late May Log into your account online

    Downloading your information to tax preparation software is simple

    To further simplify the tax filing process, you can download your information into tax preparation software such as TurboTax® or H&R Block®.1 You can download your forms and cost basis information from the Schwab Intelligent Portfolios website directly into these programs.

    Schwab Intelligent Portfolios makes tax-smart investing easier

    Simplifying the tax preparation process is a great benefit. But investing always involves the potential for taxes, so it's important to think about them throughout the year—not just when preparing your tax report.

    With this in mind, Schwab Intelligent Portfolios includes several features to help manage the potential tax implications that come with investing. These include:

    • ETF investments: Index-based ETFs are used as the asset class building blocks for portfolio construction. Individual ETFs tend to be more tax-efficient than many other investment vehicles due to lower turnover and the way in which ETF shares are created and traded. Schwab Intelligent Portfolios seeks rebalancing opportunities which can contribute to portfolio turnover and costs, however.
    • No K-1 reports: K-1 reports can make your tax reporting process more complicated, so Schwab Intelligent Portfolios excludes ETFs that are structured as partnerships and issue K-1 reports.
    • Tax-efficient sell order: The efficiency that technology brings to investing means that the cost basis of every share purchase can be tracked automatically. By keeping track of short-term vs. long-term gains and losses for each security in your portfolio, Schwab Intelligent Portfolios is designed to trade in a tax-efficient manner.
    • Tax-loss harvesting: For taxable accounts, enrolling in our tax-loss harvesting service can also potentially help to defer your current tax liabilities associated with investing.2 Losses captured throughout the year as markets fluctuate can be used to offset realized capital gains and up to $3,000 in ordinary income if enough losses accrue.

    The bottom line

    As U.S. Supreme Court Justice Oliver Wendell Holmes, Jr. once wrote, "Taxes are what we pay for civilized society." While taxes might be an inevitable part of life, there are ways to simplify tax reporting and be tax aware when investing. Schwab Intelligent Portfolios is designed to do exactly that: making tax reporting more efficient while also helping to potentially defer current tax liabilities through our tax-loss harvesting service, leaving you with more money to invest and potentially grow over time.

    How Schwab Intelligent Portfolios Can Help

    You may qualify for an income-tax deduction if you fund a traditional IRA by your filing deadline. Funding a Roth IRA if you're eligible to do so won't get you an upfront tax deduction, but you will get tax-free withdrawals on qualified distributions beginning at age 59½.

    Charles Schwab & Co., Inc. (“Schwab”) doesn't provide tax advice, so it's a good idea to consult with a qualified tax professional about your unique situation before you make any major decisions.

    Open a traditional or Roth IRA with Schwab Intelligent Portfolios now.

    1. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. H&R Block Tax Software is a registered trademark of HRB Innovations, Inc. Used with permission.

    2. Tax-loss harvesting is available for clients with invested assets of $50,000 or more in their Schwab Intelligent Portfolios account. Clients must enroll to receive this service.

    Investing involves risk including possible loss of principal.

    Tax‐loss harvesting is available for clients with invested assets of $50,000 or more in their account. Clients must choose to activate this feature. The tax‐loss harvesting feature that is available with Schwab Intelligent Portfolios Solutions™ is subject to significant limitations which are described on the Schwab Intelligent Portfolios Solutions website and mobile application (collectively, the "Website") as well as in the Schwab Intelligent Portfolios Solutions™ disclosure brochures (the "Brochures"), and the IRS website at www.irs.gov. You should consider whether to activate the tax‐loss harvesting feature based on your particular circumstances and the potential impact tax‐loss harvesting may have on your tax situation. You should read the tax‐loss harvesting disclosures on the Website and in the Brochures before choosing the tax‐loss harvesting feature. Neither the tax‐loss harvesting strategy nor any discussion herein is intended as tax advice, and neither Charles Schwab & Co., Inc. nor its affiliates, including but not limited to Charles Schwab Investment Advisory, Inc., represents that any particular tax consequences will be obtained.

    Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ are designed to monitor portfolios on a daily basis and will also automatically rebalance as needed to keep the portfolio consistent with the client's selected risk profile. Trading may not take place daily.

    (0319-99H0)


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