Forex tax treatment

mysonmark2 · #1 (**permalink**) 12-19-2006, 03:33 PM

Hello I am new to this type of account and am trying to complete my tax return.. I have talked to the IRS and read books and seem to get conflicting information regarding the tax treatment of the forex account activity. I have a loss from my investment in this account. Where should I put this loss amount. Also, is it required that I list every transaction? Any help would be appreciated.

GreenTrader Tax · #2 (**permalink**) 01-03-2007, 07:57 PM

Sorry for the late reply.

Forex is reported on line 21 (Other Income or Loss) of Form 1040 in summary form; that's ordinary gain or loss treatment. It's not subject to self employment tax.

If you elect out of IRC 988, you get the more tax-beneficial futures tax treatment - with 60/40 tax rates. The 60% is long term capital gains and the 40% is short term capital gains.

Yes, the rules are vague and confusing. We address this all on our leading forex tax content page of our Web site at http://www.greencompany.com/Educatio...Currency.shtml.

Thanks.

forexedge · #3 (**permalink**) 02-23-2008, 03:25 PM

Hi,

I have a couple of questions:

1. Is forex subjected to additional state tax, I am in California, regardless if you elect out of IRC 988?

2. Here's my situation: A broker sent me 1099 showing a large gain, and reported this 1099 to IRS. The rest of my brokers did not send 1099. I will opt out of 988, and report net gain/loss across all my accounts, as a net loss.

Will the IRS flag this since they got a big 1099 as a big gain, but I end up reporting a loss on my forex gain/loss.... but I do have proper statement documentation.

What's worse, the gain is in my wife's social security number, and losses in mine. We file jointly, will this be a problem?

3. I trade cross pairs such as EUROJPY, USDJPY, GBPJPY... as well as majors: eurousd, gbpusd, usdcad, audusd. Will I be able to opt out of 988? Going through each transaction is insanity.

Thanks,

forexedge

Quote:

Originally Posted by GreenTrader Tax

Sorry for the late reply.

Forex is reported on line 21 (Other Income or Loss) of Form 1040 in summary form; that's ordinary gain or loss treatment. It's not subject to self employment tax.

If you elect out of IRC 988, you get the more tax-beneficial futures tax treatment - with 60/40 tax rates. The 60% is long term capital gains and the 40% is short term capital gains.

Yes, the rules are vague and confusing. We address this all on our leading forex tax content page of our Web site at http://www.greencompany.com/Educatio...Currency.shtml.

Thanks.

GreenTrader Tax · #4 (**permalink**) 03-15-2008, 12:49 PM

States start with federal taxable income and make some adjustments.

So yes, forex gains are taxed in your state too; if your state has an income tax.

Michael1 · #5 (**permalink**) 01-13-2009, 05:33 PM

Hello everybody! I have been trying to obtain some help in other threads, but it seems that people don’t like beginners, or something. I know it’s kind of annoying to find a person who is just asking too simple things… Could you please help me? I got a demo from TVF and I’m reading, and reading, and reading! Is it a good demo? Should I read something special to be prepared to trade? Thank you for your help.

GreenTrader Tax · #6 (**permalink**) 02-27-2009, 05:44 PM

taxes only on this thread

someguy19 · #7 (**permalink**) 04-13-2009, 09:19 PM

What would you say for a person who's net income is a loss?

I'm 18, a college student and have never filed taxes so I'm really lost. I worked during the summer for a little less than a month but made less than 1k. The place i worked at sent me a W2 for the 2-3 weeks i worked. My broker sent me a 1099 (1099B?) to me showing me my 1.5k loss.

As for my college i'm not on any federal aid programs or scholarships. My father pays my tuition and I never see that money.

Since my net is less than the like 2,500 or whatever threshold amount, do I even have to bother filing?

mikehf · #8 (**permalink**) 04-24-2009, 08:13 AM

Hi all! I've got pretty much the same problem as SOMEGUY19. Please the answer is needed!