For first time I traded Forex with IB. I bought and sold some USD, and obviously lost some money; a few thousand. 1. I am using TurboTax, and I can't find where to add the Forex trades. I read somewhere that you add currency trades under "Contracts and Straddles", ok , I go there in TurboTax, then it asks me a. Mixed straddle election b. Straddle by straddle identification election c. Mixed straddle account election d. Net section 1256 contracts loss election I assume it is d. I choose that, but from there I don't know where to go. 2. How can I get the IB reports for Forex trades, I can see reports for stocks and stuff but not for forex. Can someone help me with getting these right?!
I'd appreciate it if someone could help with this, I found the forex trades on the IB annual statement, but I still don't know how to add the forex trades using TurboTax
Most retail Forex traders treat their gains/loss the same as 1256 contracts. You need IRS form 6781 and Schedule D. http://www.greencompany.com/EducationCenter/GTTRecCurrency.shtml http://www.irs.gov/pub/irs-pdf/f6781.pdf
I'm thinking forex traded with IB is spot forex and so one should do IRC 988 not IRC 1256, and that is what makes it confusing, I don't know how I'm supposed to go about doing that on TurboTax also greencompany's page reads: "IRC 988, by default, has ordinary gain or loss treatment. Losing traders prefer IRC 988, since it does away with capital-loss limitations, allowing full ordinary loss treatment against any type of income."
I post my cash forex trade total in a separate line on form 6781, with the text "cash forex elected out of IRC 988, see attached spreadsheet for individual trades." I then attach a spreadsheet that lists all my cash forex trades in the same format as that of the schedule D.
so I was so confused about what section 988 meant, it basically says spot forex profit/loss is to be reported as regular business, like how 1099-MISC is reported where by section 1256 requires profit/loss to be filed on a separate form; form 6781 anyhow here's the link that helped me understand, and might help someone else too https://secure.ibfx.com/Ibfxu/Catalog/Taxes/TAX1020.aspx
Rather than read the websites of accountants, why don't you hire one? If this is your first year, you need to get yourself set up properly, not relying on posts from people you don't know...