A TALE OF TWO INVESTORSA REVIEW OF THEIR 1099 TAX FORMS

Taking a closer look at your Form 1099-DIV can be eye-opening. Yourfinancial professional or CPA can help you connect the dots between
your December 31 investment statement and your April 15 tax bill.
Form 1099-DIV is one of many IRS tax forms and is used to record
investment-related income. This simple guide walks you throughwhat to look for along with insights, implications, and actions you
may want to take to improve the tax efficiency of your investments.

Joe & Joan
Traditional Taxpayer
Marginal Tax Rate on Unearned Income:40.8% (37% + 3.8% NIIT*)
Long-Term Capital Gain/Qualified
Dividend Tax Rate: 23.8% (20% + 3.8% NIIT*)

Filing Status: Married filing jointly

How much might the IRS take from Joe & Joan
Traditional Taxpayer?
Their year-end investment statement stood at $1,000,000, BUT after paying
taxes to the IRS, it went down to $983,204.
Taxes reduced their investment return by 1.7% and this assumes no active
trading during the year.

Take a closer look at their 1099-DIV to see how this can happen.
CORRECTED (if checked)
PAYER’S name, street address, city or town, state or province, country, ZIPor foreign postal code, and telephone no.

1a Total ordinary dividends$30,000

1b Qualified dividends

Mutual Fund Company
PAYER’S TIN

RECIPIENT’S TIN

24,5002e Section 897 ordinary dividends

2f Section 897 capital gain

City or town, state or province, country, and ZIP or foreign postal code$

Federal income tax withheld$Section 199A dividends

6Foreign tax paid

8Investment expenses$
Foreign country or U.S. possession

Cash liquidation distributions 10 Noncash liquidation distributions$$

11 FATCA filing 12 Exempt-interest dividends
requirement$
Account number (see instructions)4$
9Copy BFor Recipient$7,500 X 23.8% = $1,785 in federal taxes (A)13 Specified private activity
bond interest dividends

This is important tax
information and isbeing furnished tothe IRS. If you arerequired to file areturn, a negligencepenalty or othersanction may be
imposed on you if
this income is taxable
and the IRS
determines that it has
not been reported.

$14 State(keep for your records)

Box 1a – Box 1b =Non-Qualified Dividends**$30,000 – $7,500 = $22,500$22,500 X 40.8% = $9,180 in federal taxes (B)Box 2a: Total Capital Gains Distribution$24,500 X 23.8% = $5,831 in federal taxes (C)15 State identification no. 16 State tax withheld$$
Form 1099-DIV (Rev. 1-2022)

Box 1b: Qualified Dividends$Nondividend distributions

7

Box 1a: Total Ordinary Dividends:
Dividend from mutual fund:$7,500Interest income from mutual fund: $22,500
Total Ordinary Dividends:$30,000

20$$$Street address (including apt. no.)For calendar year

$5Dividends andDistributions

2b Unrecap. Sec. 1250 gain
2d Collectibles (28%) gain

3Joe & Joan Traditional Taxpayer

1099-DIV(Rev. January 2022)

2c Section 1202 gain$
RECIPIENT’S name

Form

7,500

$

2a Total capital gain distr.

$

OMB No. 1545-0110

Investments:†• Equity Mutual Fund
$500,000 Balance
1.5% Dividend yield
4.9% Capital gains distribution• Taxable Bond Mutual Fund
$500,000 Balance
4.5% Interest income

www.irs.gov/Form1099DIV

Department of the Treasury - Internal Revenue Service

1099-DIV:
Four boxes
to review
Four boxes
to reviewBox 1a: Total Ordinary Dividends- Includes qualified dividends- Includes non-qualified dividends- Includes net short-term capital gains
distribution from mutual funds and/or
real estate investment trusts (REITs)- Includes taxable interest income frommutual funds (not just dividends)- Not all foreign dividends are qualified- Generally, lower tax rate for qualified
dividends

Box 1b: Qualified Dividends- Dividends paid by a U.S. company orqualifying foreign company

Box 2a: Total Capital Gains Distribution- Net long-term capital gains distribution
from mutual funds or REITs

Box 1a – Box 1b = Non-Qualified Dividends- Includes interest income- Includes dividends from REITs- Taxed as ordinary income and often ahigher corresponding tax rate

Box 12: Exempt-Interest Dividends
Interest income from municipal bond funds.
Generally, tax-free at the federal level.
Joe & Joan had $0 in municipal bonds.

Summary of taxes(A) Tax on dividends:(B) Tax on interest income:(C) Tax on capital gains:$1,785$9,180$5,831

Total Federal Tax Due:

$16,796-1.7%

Percent lost to taxes:

A hypothetical illustration. *Net Investment Income Tax.
**Any non-qualified dividends are taxed as ordinary income.
† Using 2023 average capital gains distribution % of Morningstar
broad category ‘US Equity’ which includes mutual funds and ETFs.
The dividend yield is represented by the yield on the S&P 500® Indexand interest is based on the yield of the Bloomberg U.S. Aggregate
Bond Index as of 12/31/2023.

Not a Deposit • Not FDIC Insured • May Lose Value • Not Bank Guaranteed • Not Insured by any Federal Government Agency

How about a tax-managed investor such as Uncle
Sam & Aunt Betsy?

Uncle Sam & Aunt Betsy
Tax-Aware Taxpayer

Contrasting with Joe & Joan on the prior page, let’s look at tax-aware
investors in two distinct mutual funds; their $500,000 U.S. large cap
fund has a full-year focus on tax-management and their $500,000 in
fixed income is invested in a municipal bond fund. So, while Joe &Joan received the average taxable distribution from their investments,
Uncle Sam & Aunt Betsy took advantage of an investment approachwith a full-year focus on tax-management and their results were quite
different:

Marginal Tax Rate on Unearned Income:
40.8% (37% + 3.8% NIIT*)
Long-Term Capital Gain/Qualified
Dividend Tax Rate: 23.8% (20% + 3.8% NIIT*)

Filing Status: Married filing jointly

Their year-end investment statement stood at $1,000,000 and after paying
taxes to the IRS, it’s only down to $999,167.
They lost just 0.1% of their investment return to the payment of taxes.

• Municipal Bond Mutual Fund
$500,000 Balance
3.2% Interest income

Take a closer look at their 1099-DIV to see how this can happen.

(generally tax-free at federal level)

CORRECTED (if checked)
PAYER’S name, street address, city or town, state or province, country, ZIPor foreign postal code, and telephone no.

1a Total ordinary dividends

3,500

$

1b Qualified dividends

Mutual Fund Company

2a Total capital gain distr.

0$
PAYER’S TIN

RECIPIENT’S TIN

2c Section 1202 gain

RECIPIENT’S nameFor calendar year
20$2d Collectibles (28%) gain$$

7Dividends andDistributions

2b Unrecap. Sec. 1250 gain$

Nondividend distributions

4Section 199A dividends

6

Federal income tax withheld$$

Investment expenses$
Foreign tax paid

8

Foreign country or U.S. possession$
9

Cash liquidation distributions 10 Noncash liquidation distributions$$

11 FATCA filing 12 Exempt-interest dividends
requirement

16,000$Account number (see instructions)(Rev. January 2022)

2f Section 897 capital gain$

City or town, state or province, country, and ZIP or foreign postal code1099-DIV$

5Street address (including apt. no.)Form2e Section 897 ordinary dividends
3Uncle Sam & Aunt Betsy

OMB No. 1545-0110

3,500$14 State

13 Specified private activity
bond interest dividends(keep for your records)

This is important tax
information and isbeing furnished tothe IRS. If you arerequired to file areturn, a negligencepenalty or othersanction may be
imposed on you if
this income is taxable
and the IRS
determines that it has
not been reported.

$Department of the Treasury - Internal Revenue Service

A hypothetical illustration. *Net Investment Income Tax. **Any non-qualified dividends aretaxed as ordinary income. ‡The dividend yield is represented by 50% of the yield on the S&P 500® Indexand interest is based on the yield of the Bloomberg U.S. Municipal Bond Index as of 12/31/2023.

How low can you go?

Russell Investments / A Tale of Two Investors

Box 1a – Box 1b =Non-Qualified Dividends**$3,500 - $3,500 = $0
$0 X 40.8% = $0 in federal taxes (B)Box 2a: Total Capital Gains Distribution$0 X 23.8% = $0 in federal taxes (C)Box 12: Exempt-Interest Dividends
Interest income from municipal bond funds
Generally, tax-free at the federal level.
$16,000 X 0% = $0 in federal taxes

Summary of taxes(A) Tax on dividends:(B) Tax on interest income:(C) Tax on capital gains:

$833
$0
$0

Total Federal Tax Due:

$833
-0.1%

Percent lost to taxes:

A quick comparison of two hypothetical cases:
As you see here, two taxpayers with thesame portfolio value can potentially end up
with very different outcomes on an after-taxbasis. Note that these two couples had sameinvestment amount and materially different
federal tax bills. Details matter as no one
wants to pay more to the IRS than they haveto. Remember, you DON’T need to be in the
top tax bracket to feel the pinch from taxes.

Box 1b: Qualified Dividends$3,500 X 23.8% = $833 in federal taxes (A)15 State identification no. 16 State tax withheld

www.irs.gov/Form1099DIVBox 1a: Total Ordinary Dividends:
Dividend from mutual fund:$3,500
Taxable int. income from mutual fund:$0Total Ordinary Dividends:$3,500Copy B
For Recipient$$
Form 1099-DIV (Rev. 1-2022)

Investments:‡• Tax-Managed Equity Mutual Fund
$500,000 Balance
0.7% Dividend yieldNo capital gains distribution

Joe & Joan
Traditional
Taxpayer

Uncle Sam& Aunt Betsy
Tax-Aware Taxpayer

Year-end investment statement showed:$1,000,000$1,000,000

Federal tax due from:
Dividends
Interest Income
Capital Gains
Total Federal Tax$1,785$9,180$5,831$16,796$833$ 0$ 0$833

After-tax value:$983,204$999,167

Percent of investments lost to taxes:-1.7%-0.1%/ 2Between a Rock and Hard Place?
Here are some ideas on changes to consider:
CAPITAL GAINS DISTRIBUTIONS (BOX 2A)
Q: Are these distributions high for your investment amount? Are the capital gains
being reinvested?
A: If these distributions are being reinvested, look into turning off that reinvestment,
and migrate that cash into a tax-managed approach that may work to minimize
capital gains.

DIVIDENDS (BOX 1A/1B)
Q: Is there a need for the dividend income? Are the dividends being reinvested?​
A: If these dividends are being reinvested, look into turning off that reinvestment, andmigrate that cash into a tax-managed approach that may work to balance dividends with capital appreciation.​“WHEN YOU FINDYOURSELF IN A HOLE,
THE FIRST THING TO
DO IS STOP DIGGING.”—WILL ROGERS

INTEREST INCOME​(BOX 1A)
Q: Is there a need for this current income? Is interest income being reinvested?
A: Consider municipal bonds for tax-free income or a lower tax bill.

TRANSITION PLAN
Q: Do you have a similarly frustrating tax bill year after year after year? When was
the last time you rebalanced your portfolio? Are you letting the potential tax billinfluence your decision-making?
A: It may make sense to transition all (or part) of the portfolio to a more taxmanaged approach. Understand the tax impact of a transition, if any, and what thepayback period might be. Russell Investments can work with your financial advisor
to help analyze potential taxes and the payback period for portfolio transitions.

REALLOCATIONS, TACTICAL TRADING AND FUND REPLACEMENTS
Q: Does the portfolio trade frequently due to reallocations, tactical adjustmentsor fund replacements?
A: Frequent trading within a taxable portfolio can result in unnecessary taxes
when positions with unrealized gains are constantly and/or systematically sold.
When making changes to a taxable portfolio always be sure to consider thetax consequences. Smaller and less frequent allocation changes may be betterfor tax-sensitive investors so that benefits from portfolio improvements are notoutweighed by tax costs.

Russell Investments / A Tale of Two Investors/ 3

2024 Federal Income Tax Brackets (Short-term capital gains are taxed as ordinary income.)
Tax Rate

Married Filing Jointly

SingleMarried Filing Separately

Head of Household

10%$0 – $23,200$0 – $11,600$0 – $11,600$0 – $16,550

12%$23,201 – $94,300$11,601 – $47,150$11,601 – $47,150$16,551 – $63,100

22%$94,301 – $201,050$47,151 – $100,525$47,151 – $100,525$63,101 – $100,500

24%$201,051 – $383,900$100,526 – $191,950$100,526 – $191,950$100,501 – $191,950

32%$383,901 – $487,450$191,951 – $243,725$191,951 – $243,725$191,951 – $243,700

35%$487,451 – $731,200$243,726 – $609,350$243,726 – $365,600$243,701 – $609,350

37%Over $731,200

Over $609,350

Over $365,600

Over $609,350

2024 Long-Term Capital Gain/Qualified Dividend Tax Rates
Tax Rate

Married Filing Jointly

SingleMarried Filing Separately

Head of Household0%$0 – $94,050$0 – $47,025$0 – $47,025$0 – $63,000

15%$94,051 – $583, 750$47,026 – $518,900$47,026 – $291,850$63,001 – $551,350

20%Over $583,750

Over $518,900

Over $291,850

Over $551,350

2024 Standard Deduction1, NIIT 2 Threshold, Capital Loss Limit 3
Married Filing Jointly

SingleMarried Filing Separately

Head of HouseholdStandard Deduction$29,200$14,600$14,600$21,900

3.8% NIIT Thresholds$250,000$200,000$125,000$200,000

Capital Loss Limit$3,000$3,000$1,500$3,000Source: Internal Revenue Service
Blind, or age 65 or older: +$1,500 (Married); +$1,950 (Single or Head of Household).
2
Net investment income tax.
3
Maximum capital loss that can be deducted in a tax year, if your capital losses exceed your capital gains.

1Talk to your financial professional and/or tax accountant to see whatsteps can be taken to potentially minimize your tax burden.
Or visit russellinvestments.com to discover the potential benefits of tax-managed investing.
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or entity as advice or recommendations
specific to that individual entity. Anyone using
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The S&P 500® Index: A free-float capitalization-weighted index published since 1957 of theprices of 500 large-cap common stocks actively
traded in the United States. The stocks includedin the S&P 500® are those of large publicly
held companies that trade on either of the twolargest American stock market exchanges: theNew York Stock Exchange and the NASDAQ.
Bloomberg U.S. Aggregate Bond Index: Anindex, with income reinvested, generally
representative of intermediate-term government
bonds, investment grade corporate debt
securities, and mortgage-backed securities.
(specifically: Bloomberg Government/Corporate
Bond Index, the Asset-Backed Securities Index,
and the Mortgage-Backed Securities Index).
Bloomberg U.S. Municipal Bond Index: Covers
the USD-denominated long term tax-exempt
bond market.
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