Forex Tax & Regulatory Treatment

We are the leading site for forex tax treatment content, and forex ranks in our top three content views.

Forex refers to trading foreign currency contracts in the Interbank foreign-exchange market. Most of our clients have retail off-exchange forex brokerage accounts. You can also trade currency futures on futures exchanges and that tax and regulatory treatment is significantly different from forex. Currency futures are Section 1256 contracts (regulated futures contracts). Be careful, many professionals and IRS agents are not familiar with the forex tax-treatment rules.

Trader Tax Center: Forex tax treatment (start here).

Green’s 2014 Trader Tax Guide: Chapter 3 Tax Treatment.

  • Forex accounting and tax reporting: Summary reporting is used for forex traders and most brokers offer good online tax reports. Spot forex brokers are not supposed to issue Form 1099s at tax time, only forwards are covered instruments on Form 1099s. There are several nuances and complexities in forex accounting that you should know about. For example, forex brokers handle rollover trades differently. (We cover forex accounting issues in Green’s 2014 Trader Tax Guide, Chapter 4 Accounting Gains and Losses.)

Webinars: Watch our latest in-depth Webinars, Forex Tax Treatment and CFTC Forex Trading Rules for Americans dated Feb. 27, 2013 and Feb. 23, 2012. Click here for more Webinars related to forex. We have three forex tax Webinars scheduled with FXCM for Q1 2014, and did same in 2013.

Website section: Forex Tax & Regulatory Treatment

Blog articles: Forex Tax & Regulatory Treatment

Forex Tax:
Aug 16 12 - Why do forex forward dealers issue 1099s, yet retail spot forex brokers do not?
Sep 20 11 - Iraqi Dinar Investing Does Not Trigger IRS Personal-Use Rules
Jul 25 11 - Iraqi dinar revaluation: Real consequences or just rumors?
Jul 12 11 - Are lower 60/40 tax rates on futures in jeopardy?
Jun 02 11 - Foreign Bank Account Report (FBAR) problems
Jan 29 11 - Spot forex update
Nov 11 10 - Forex tax update

Forex Regulation:
Oct 30 10 - Is U.S. forex trading safe?
Oct 01 10 - U.S. forex traders have 270 extra days to trade with foreign banks
Sep 23 10 - Offshore retail forex trading accounts are being forced back to the U.S.
Sep 01 10 - Can American off-exchange retail forex traders evade strict new CFTC rules by trading on offshore platforms?
Aug 31 10 - New CFTC forex trading rules call for 50:1 leverage
Aug 10 10 - U.S. forex traders may not be able to skirt rules by moving accounts offshore
Aug 07 10 - Dodd-Frank bill seeks to crack down on forex arena

What’s next?
There are many nuances and uncertainties when it comes to forex. For many forex traders, there are considerable tax dollars at stake, whether it’s deducting a huge ordinary tax loss without a capital loss limitation, or taking advantage of the lower 60/40 futures tax rates under certain limited conditions. Many forex traders want to be sure they are using complicated forex tax laws correctly, and to their maximum advantage, so they chose to consult with us about it.

We recommend a 30-minute phone consultation with Robert A. Green, CPA.

Business treatment: Many forex traders qualify for trader tax status, so they can also benefit from business treatment, entities and our other tax strategies. As pointed out in Green’s 2014 Trader Tax Guide (Chapter 1), many forex traders’ account sizes are too small in the eyes of the IRS – mini retail forex accounts – and they will have a hard time qualifying. Many forex traders also have full-time jobs, and it’s hard for the IRS to believe their nighttime trading hours. If you do qualify for trader tax status, consider an entity.

Income tax preparation: Forex traders with significant trading gains taxed with lower 60/40 tax rates or large ordinary losses often prefer to have our CPA firm prepare their annual income tax returns. If the ordinary loss is over $50,000, you need to file a Form 8886, too. Local accountants usually don’t know all the forex tax-treatment nuances and complexities, and forex traders seek correct handling with peace of mind.

Many Webinars in March

Highlighted Recent Recordings:

*Entities & Retirement Plans for Traders
*Trader Tax Law Update: Current Developments
*2013 Tax Reporting & 2014 Planning
*Forex Taxation
*Audits of Performance Records
*Kick-Off to 2013 Tax-Filings for Traders
*ObamaCare taxes are starting to affect traders
*The Tax Court Was Right To Deny Endicott Trader Tax Status
* Investment management: Key updates
*Learn the DOs and DON’Ts of using IRAs and other retirement plans

Trader Tax Center

Tax Newsletter & Calculators

Highlights (see the full archive):

Mar 27: Protect yourself from market losses with a Section 475 MTM election Read More

Mar 25: IRS guidance on bitcoin transactions will chill its use Read More

Mar 24: SEC Large Trader Reporting Rule Read More

Feb. 27: Another trader tax court loss (Assaderaghi) Read More

Feb. 1: Net investment tax details Read More

Jan 14: New IRS guidance on SE tax deductions affects partnership AGI-deduction strategies. Read More

Jan 9: A major tax reform bill in 2014 is unlikely, and “tax extenders” may be history, too. Read More

Jan 7: Kick off to 2013 tax filings for traders. Read More

Dec 4: IRS final regulations for Net Investment Tax help traders. Read More

Dec 3: Bitcoin is a hot commodity, but is it taxed like commodities, assets, or currencies? Read More

Nov 15: Another non-business trader gets busted in tax court trying to cheat the IRS. Read More

Nov 6: Hedge fund investors depend on “assurance” from quality independent CPA firms. Read More

Oct 29: ObamaCare taxes are starting to affect traders. Read More

Sept 15: Not Easy For New Yorkers To Escape Big Apple's Tax Bite. Read More

August 30: The Tax Court Was Right To Deny Endicott Trader Tax Status Read More

August 18: Common trader tax mistakes Read More

July 24: Learn the DOs and DON’Ts of using IRAs and other retirement plans in trading activities and alternative investments Read More

March 31: PFG investors can deduct theft losses on 2012 tax returns with Rev. Proc. 2009-20 safe harbor relief. That’s great news! Read More

March 5: Caution, downloading securities Form 1099-Bs into TurboTax often leads to incorrect tax filings Read More

Sept 5: High-income traders and ObamaCare’s 3.8% Medicare tax Read More

GreenTrader blog archive, Forbes blog, Benzinga blog.


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