Taxing / Broker Question w/ FX trading.

Discussion in 'Forex' started by Froglet, May 18, 2012.

  1. Froglet



    I've begun reading on babypips, but I noticed that the IRS has started to change its tax requirements for securities.

    My situation is this. I normally file my taxes through TURBOTAX and have always used the TXF file that's been provided to me by the broker. The clearing house is PENSON.

    I want to know if and what tax implications I might run into if I venture into trading FX. Is it easy to file for this? Any ideas or help?

    My strategy is to do S/T trades. So everything is traded within the year.

  2. for me it wasn't simple. I've used turbotax for years, but 2011 was my first year trading forex. I couldn't get it to give me the 60/40 split. But some say that is because forex doesn't qualify for the 60/40 split. Others say you can get it if you claim (I forget the number, but it's some three number exemption that begins with 9) a certain filing status. But no, if you have a profit, it is not simple.

    However, if you hav a loss, I can see how it would be very straight forward and maybe a very good deal tax wise, because there would be no cap gains loss limit.

    At anyrate, I had to redo the whole thing by hand.
  3. Surdo


    In other words you don't know if Fx is treated as Section 1256 contracts or not???

    Why is this such a grey accounting area, does anybody trade for a profit on this board?
  4. check with the IRS, they don't know either. There was some debate and Green who as you know is a very reputable trading accountant thinks that no it does not qualify for the 60/40 split.
  5. Surdo


    Nobody trades Fx profitably, so it is a non-issue!
    I read the Green piece on this. Nobody knows the answer. This thread will just fade away.

    He says you must "opt out" of 988 for 1256, as you mentioned.

    I just buried mine as a capital loss and it went away, I trade exclusively Futures/ETF's anyway.

  6. Froglet


    Should I stick w/ stocks then? Taxation in the US sucks. I might as well just be a landloard. lolz
  7. Surdo


    Trade section 1256 contracts, 60/40 capital gain split.
    I see you have done a lot of research on the matter.
  8. I've traded forex for 5 years. Had a modest loss the first year but profitable each year since then. It's not easy and I've had some spectacular losses (including yesterday on AUD.USD). It's always three steps forward and two backward for me.

    I've tax reported using the 60/40 long term/short term split each year including my loss in year 1. Never a peep from the IRS. I expect in part that it's because my broker (IB) doesn't report anything related to forex on their 1099 forms. So the IRS is seeing income from me that they don't have reported to them. That doesn't originate a lot of audits.

    I do write off my computer hardware and direct expenses (e.g. data feed, internet, etc.) as a trading business. Not huge $ and a very small percent of my capital gains income. But again, never a question from the IRS.
  9. yeah, we switched sides a little early on that AUD/USD. Everybody said it was going down, I thought it already did.

    I just sent my whole IB 1099 and year end statement along with my tax returns. I took the 60/40 split but I've never elected 988.

    Same here, not a peep.
  10. AK100


    And now US citizens are not allowed to leave.

    Land of the Free!
    #10     May 23, 2012