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Thread: Forex Taxes

  1. #1
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    Re: Forex Taxes

    OK. I will start with a question, for USA region. Many Forex brokers do not send copies of trading to IRS, but Stock Brokers DO send copies. Probably because Forex is closer to gambling than is stocks, since there is no real ownership of currencies purchased. It is more of an honor system where you "hope" your Forex Broker will send you your money when you request it.

    My question is: If we have 5 brokerage accounts (as an example), and lose money with 4 out of 5 brokerages, do we still need to disclose our profits from the 5th broker with IRS? (Assuming we still have a net "loss" for the year when we combine the balance sheet for all 5 brokers.)

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    Re: Forex Taxes

    I lost $7000.00 this year, how do I go about listing it on my tax forms?

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    Re: Forex Taxes

    as an individual, which is the simplest way of declaring profits/loss on US tax forms? do you need to use a particular schedule?

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    Re: Forex Taxes

    I am a resident in USA.......
    When claiming losses, you can do so. But, what I was told by my tax preparer was nearly impossible. There is a form, which has 5 entries per form from the IRS. According to her(She worked for California State Board and other agencies, so I believe her), you need to handwrite every single trade down, time, date, entry cost in US dollars, exit time, price, and profit/loss in USD to be able to write it off as a loss. Of course, I never did this, as one year, I had thousands and thousands of trades totaling a loss that I will never admit to otherwise. This also goes if you are claiming profits, too. Pre-printed statements from your account are not acceptable. My statement from broker was some 100 pages of what, 20-50 trades a page? So every page of statement is 10 to IRS. Yeah, write those by hand, I don't think so.
    If someone is managing your money, you can't write off fees unless they are licensed by US Government, or if, somehow, your funds are held in an LLC.
    So, it's profit, minus taxes, minus fees(of total profit/First number) = your net if they are not licensed on US soil.
    If licensed, it's profit minus fees, then minus taxes of remainder.

    The problem is, if you are successful, the IRS will find out anyways....Any deposit of $10,000 gets reported to IRS anyhow. If you try $4999.99 twice or three times to avoid the 10,000 limit, it will actually be worse via a SAR, or Suspicious Activity Report filed to the IRS by your bank. Keep doing that and you keep getting SARs and the IRS will not play around with you. Remember, that's how they got Al Capone.

    These are just a few of the bazillion reasons to get out of trading and living in the USA at the same time. Trading is fine and living here is fine, but not both at the same time, that's a recipe for disaster.

  5. #5
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    Re: Forex Taxes

    No, I never did do the trade by trade handwritten reports....I'd still be doing it to this day.
    I just handed her the last page and said "Here's what I lost, you figure it out!". She dealt with it that way somehow.

    Thanks though for that link, I am sure it will prove very useful to many of us here, greatly appreciated!

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    Re: Forex Taxes

    i perused the article you suggested and the 1256 status would be my choice. what is the next step after that?



    Quote Originally Posted by Yarman

    Hey my friend...this depends if you elect the IRS 988 Status or the 1956 Status. Without knowing which way appeals to you, I can't give you a direct answer. Look at this link to determine which way you elect to trade. It may sound confusing within the first few minutes of reading, but will become clear on how to declare and how to file.

    Code:
    http://www.greencompany.com/EducationCenter/GTTRecCurrency.shtml
    Good Luck

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    Re: Forex Taxes

    Thank you for the link. very helpful! The IRS can't figure out how to deal with forex taxes, how is an individual retail trader suppose to figure all this out.

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    Re: Forex Taxes

    Quote Originally Posted by Sneed
    OK. I will start with a question, for USA region. Many Forex brokers do not send copies of trading to IRS, but Stock Brokers DO send copies. Probably because Forex is closer to gambling than is stocks, since there is no real ownership of currencies purchased. It is more of an honor system where you "hope" your Forex Broker will send you your money when you request it.

    My question is: If we have 5 brokerage accounts (as an example), and lose money with 4 out of 5 brokerages, do we still need to disclose our profits from the 5th broker with IRS? (Assuming we still have a net "loss" for the year when we combine the balance sheet for all 5 brokers.)
    Tax preparation is better handled by not just any tax preparer. You should first of all google- forex taxes in US or wherever you are from. Trading taxes in some how complicated and should be given to somebody that knows about it, who also handle many of it per year and follows the frequent changes in the tax code. Such a person will also tells you of so many benefit that can come to you by been treated as a trader and not as an investors. If you are treated as a trader your tax liability may saves you as much as 15-20%. He or she could also tells you if you need to trade as a business (LLC- Limited Liability Corporation) or in your own name. Trading as an LLC has so many benefit to it with lots of write-off, deduction, been able to claim cost of education, computer equipment and softwares, travels and hotel say when you attend trading seminars wherever it might be in the world, deduct your health insurance premium and lot more. You can also deduct the cost of hiring a tax consultant who could be a tax lawyer or a CPA with specialization in investment. Doing a google or should i say a bing search will help you get one in your area. The cost would not be that much and more so since you can claim the fee as cost of doing business. One last thing, before you meet with any consultant do a little reading on you own to be able to get more benefit from the service. More pips to you.

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    Gentlemen, It's almost tax time again. Any more info on filing Forex Profits?

    Thanks

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    Quote Originally Posted by rcbarlow View Post
    I lost $7000.00 this year, how do I go about listing it on my tax forms?


    government should make some payments for you in such horrible situation. LOL

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