As part of your client’s Betterment account, they may own ETFs that invest in foreign *holdings and throughout 2017, the ETFs may have included foreign-source dividends in their distributions and may have paid foreign tax on those dividends. If applicable, the foreign tax paid has* been* reported on your 1099-DIV in Box 6.*
Foreign source income is related to, but different from, foreign tax paid. Securities that do not report foreign tax paid may still have foreign source income. For the securities that have it, the foreign source income amount is included in the total dividends and distributions reported to you as part of Box 1a and Box 1b in the 1099-DIV Detail section* of your Consolidated Tax Statement*.
The percentage of foreign source income varies by ETF, so please consult materials from the fund provider. For example, here are some resources below:
Federal tax law attempts to prevent double taxation on *your foreign source income amounts and therefore, you may be eligible to claim either a deduction or credit for foreign tax paid.*
Betterment is not a tax advisor and the information provided should not be construed as tax advice, but should be used for informational purposes only. Please consult a qualified tax professional and refer to IRS Publication 514, IRS Form 1116, and IRS Publication 17 to determine the rules that apply to your or your clients’ individual tax situation.