Anyone who trades forex with IB, how are you reporting Forex gains? The 1099-B they sent me doesn't include any Forex activity and their activity statements for forex don't seem to add up.
Download their end of year activity statement and figure out your FX trading gain/loss by netting out deposits/withdrawals and eliminating P&L in other asset classes (those are clearly shown). Then report as ordinary income in most cases, for more info see this: http://www.greencompany.com/EducationCenter/GTTRecCurrency.shtml
I'm having the same conundrum. Do you mean "summing" up the cash reports and netting deposits/withdrawls?
I use IB's year end summary as well to reconcile my +'s and -'s to USD to determine forex P/L that needs to be reported. Basically it's whatever is left after accounting for foreign dividends, gain/loss on foreign stock sales, foreign tax withholding, commissions on forex trades paid in USD, etc. I then report the net gain/loss as a single line item on form 6781. Reporting as "ordinary income" is completely incorrect. It's a capital gain/loss for traders and hobbists and is normally subject to 60% long term/40% short term tax treatment regardless of the holding period.
Do you deduct all the commissions from the capital gains? I think the answer is yes but just want to confirm
Yes. The net P/L is reported. But for the cross trades (i.e. those not involving USD such as EUR.CHF) I first get my gross gain in CHF converted to USD and then subtract off the USD commissions. For trades with USD as the base currency it's more straight forward.
When you run your Account Statements, does anyone know what "Cash FX Translation Gain/Loss" under the Cash Report is all about?? It is not your FOREX P/L....at least not here.
I just reported my 1090 int Then i figure out how much I had on Dec 31 (based on the yearly statement) and subtracted how much I had on Jan1, minus the interest, and reported the difference as 60% long term and 40% short term, Plus I filed by snail mail and sent the whole 1099 and yearly statement in in a big manilla envelope. That was the only way I could get turbo tax to give me the 1256 tax break. But this is the last time ever I will use the internet version of turbo tax. The one you get at wal mart or staples is much much better. otherwise it reported it as just income. If it was loss, that would have been cool. I don't know if the IRS would treat it as income(loss) or cap gains (loss) with a 3k limit. otherwise, try to get the favorable 1256 60/40 split, since they haven't come up with a ruling yet if retail forex is 1256 or just a conversion. to reiterate, if it was a good year report it as 1256 trades, if it was a bad year report it as a conversion. I'm not an accountant, but I have been in hot water with the IRS most of my life and they don't scare me. Sometimes you can make more on the money they haven't yet confiscated than paying them up front. I'm just a small little podunck retail trader, so we aint talking about much in the forex account.
penny wise, pound foolish. maybe you should hire an accountant... forex is treated as a section 988 loss gain unless you opt out of it....so its ordinary income or loss unless you opt out of section 988