Do I pay taxes on earnings for the year even if total account is a loss?

Then you've created a problem for yourself. You should have been filing the loss each year, which would have likely created a carry-over to this year, and possibly even for a few more years.

It's possible that you can file amended returns for previous years. But you'll need to address that with a qualified accountant. Then you'll need to balance the cost of the amended returns with any potential savings for this year, and going forward.

The lessons here are (1) stop trading forex, and (2) report your losses.

 

Agreed, but a quality preparer is the best value-for-money I spend all year.

Yes, possibly. But there's a dangerous myth out there that you can "blame" your CPA for errors on your return.

 

You "fear" too much.

 

Yes, there's a 3-year carry-back provision somewhere in there, thus the need for a CPA.

 

Highly unlikely, though you apparently don't realize it.

 

To each his own. Audits are a real nuisance. There are 99 better uses of one's brainpower.

 

It is worth it for peace-of-mind?

 

Might be for those who have elected "trader status"... but if memory serves, that eliminates the possibility of any gains being taxes at long term capital gains rates.

Somebody please correct this if wrong.

 

Not to me. I've been audited a couple of times. Not something to legitimately fear unless you're trying to "get away with something".

The last time I had my taxes done by a CPA it cost $500+. I queried, "is your software just Turbo Tax on steroids"? He said yes. Not worth it to have him do it.

 

Ahh! But is trading FX the same as trading futures, which eliminates the "trader status" rule and can the section 1256 rule be invoked? CPA time!