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Interactive Brokers Forex Tax Reporting?
- Thread starter rrover
- Start date
Quote from oldtime:
to reiterate, if it was a good year report it as 1256 trades, if it was a bad year report it as a conversion.
This doesn't sound like good advice. Your reported forex P/L isn't/shouldn't be dependent on whether or not you have a gain or loss. The facts of your situation should determine your accounting.
My first year trading forex I had a loss, and consistent with my statement above, I split the loss 60/40. My subsequent trading year's have had sizeable forex gains which have also been reported with the 60/40 split. If it comes down to an audit, such consistency helps support your tax reporting approach.
what tax software do you use if any? I tried turbotax, and ended up just having to do it by hand to get the 60/40 split.Quote from Hurricane:
This doesn't sound like good advice. Your reported forex P/L isn't/shouldn't be dependent on whether or not you have a gain or loss. The facts of your situation should determine your accounting.
My first year trading forex I had a loss, and consistent with my statement above, I split the loss 60/40. My subsequent trading year's have had sizeable forex gains which have also been reported with the 60/40 split. If it comes down to an audit, such consistency helps support your tax reporting approach.
For now, this is a very simple issue. Forex losses should be reported as IRC 988 to maximum tax advantage. Forex gains should, for now, be reported under 1256 for max benefit of 60/40 split.
As for IB, it's a pain either way to find out what your year-end forex pnl is. I dunno why IB doesn't have an easier system to track this. Their forextrader should be a separate statement or something.
As for IB, it's a pain either way to find out what your year-end forex pnl is. I dunno why IB doesn't have an easier system to track this. Their forextrader should be a separate statement or something.
Quote from oldtime:
what tax software do you use if any? I tried turbotax, and ended up just having to do it by hand to get the 60/40 split.
I use software at taxactonline.com to do all of my tax reporting. It's a free service that I first learned about from the IRS. I can't say it's better than Turbotax or the other packages out there but it works for me. I enter forex P/L as a single line entry in the Federal Q&A > Investment Income > Gain or loss on the sale of investments > Futures or foreign currency contract reporting (Form 6781) section and it does the 60/40 split for me.
Quote from zxd:
I think I figured it out.
If you do everything I said above, and you don't take out unrealized P/L (from non-forex transactions), you will have your TOTAL unrealized P/L. Your total non-realized P/L cannot be deducted on your taxes unless you're an active trader. So take out the non-realized P/L (from non-forex transactions) from that subtotal and you'll have your forex unrealized P/L which can be treated mark-to-market unless you elected out of §988 treatment.
If this is confusing let me know, and I'll explain it.
Since I'm a CPA, I may have to include a disclosure here.
Circular 230 Notice: In accordance with Circular 230, please note that any tax advice given herein (and in any
attachments) is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of (i)
avoiding tax penalties or (ii) promoting, marketing or recommending to another party any transaction or matter
addressed herein.
Is it possible to report realized profits only ?
Quote from Hombre:
Is it possible to report realized profits only ?
Without having done extensive research, I will go ahead and say no. Cash forex is treated mark-to-market.
Circular 230 Notice: In accordance with Circular 230, please note that any tax advice given herein (and in any
attachments) is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of (i)
avoiding tax penalties or (ii) promoting, marketing or recommending to another party any transaction or matter
addressed herein.
Hurricane,
thanks for sharing your infor regarding the tax treatment of forex.
You wrote: 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.
I would like to ask you for opinion and would appreciate any input from you or anyone else familiar with the topic, so here is my issue:
I have been trading futures and only last year(2011) I have done some forex trading. My overall profit in futures was $17,800, as reported in year-end tax document from my broker(IB). I had a loss in forex cca$6800, but this was not included/reported by broker on 2011 tax form (not included in section1256). According to Hurricane, it should be reported on form 6781 as a single line item. What line should it be specifically?
Understandably, if I do not report this line item correctly, it appears as if i made $6800 more and would have to pay taxes on a larger profit amount ,than it really is, since my total p/l for 2011 was 17800-6800=11,000, and not 17,800 as reported by my broker.
Thanks for the input/guidance on this issue,
thanks for sharing your infor regarding the tax treatment of forex.
You wrote: 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.
I would like to ask you for opinion and would appreciate any input from you or anyone else familiar with the topic, so here is my issue:
I have been trading futures and only last year(2011) I have done some forex trading. My overall profit in futures was $17,800, as reported in year-end tax document from my broker(IB). I had a loss in forex cca$6800, but this was not included/reported by broker on 2011 tax form (not included in section1256). According to Hurricane, it should be reported on form 6781 as a single line item. What line should it be specifically?
Understandably, if I do not report this line item correctly, it appears as if i made $6800 more and would have to pay taxes on a larger profit amount ,than it really is, since my total p/l for 2011 was 17800-6800=11,000, and not 17,800 as reported by my broker.
Thanks for the input/guidance on this issue,
I would report it on Line 1 of form 6781 on a row separate from your futures gain. You'll potentially have two issues.
1) Broker didn't report anything so you'll need to be prepared to document the reported loss. IRS never came back to me when I did the same.
2) You're reporting the forex loss as a 1256 contract. That seems to be what most are now doing but it's still subject to some unclear tax guidance. As mentioned elsewhere in the thread, this will reduce the tax write-off as 60% of the loss will be treated as long term.
1) Broker didn't report anything so you'll need to be prepared to document the reported loss. IRS never came back to me when I did the same.
2) You're reporting the forex loss as a 1256 contract. That seems to be what most are now doing but it's still subject to some unclear tax guidance. As mentioned elsewhere in the thread, this will reduce the tax write-off as 60% of the loss will be treated as long term.