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FF Trader Tax Thread

Well forex fans i coughed up 150 dollars today to talk to a certified public accountant who specializes in trading. I had a list of questions already emailed to him the night before. Within a few minutes i could see that that there is no way a cookie cutter approach would work in this area. The things we discussed were very specific to my situation and that had a direct bearing as to weather to use LLC at all or to elect MTM or what ever. I would encourage any of you seriously thinking about forming an entity to spend a few bucks first,because other areas of your life may directely affect how you approach this issue. I am not affiliated with any tax firm or law office in any way . I just hate to see green horn traders spend alot of money (like I did)and create alot of book keeping that may not be that benifical. Good Trading to all GB
Quoting bookfixer
No you do not need to list every trade, just the total profit/loss for the year. For acquisition and sale dates simply enter "various", the 6781 takes care of the allocation of ST vs LT automatically.
Hi,
I have a question there. What tax software are you talking about. I know HRBlock does not have the 6781 form in their online product. Turbotax has the 6781 , but it almost looks like you have to list all the trades you took? I haven't received a 1099-B or any such form from any of my brokers, so can i instead sum up the profit/loss i had at each broker and list as a single line item? Thanks for your help, i would really not like to enter all those 100's of trades line by line.

Regards
Hey Trader Tax,

Earlier inthis thread I noticed you said it was not a good idea to have a one person LLC, while what about a single person C corp.? would that not be a good idea as well? Thanks
Quoting George B.
Well forex fans i coughed up 150 dollars today to talk to a certified public accountant who specializes in trading. I had a list of questions already emailed to him the night before. Within a few minutes i could see that that there is no way a cookie cutter approach would work in this area. The things we discussed were very specific to my situation and that had a direct bearing as to weather to use LLC at all or to elect MTM or what ever. I would encourage any of you seriously thinking about forming an entity to spend a few bucks first,because other areas of your life may directely affect how you approach this issue. I am not affiliated with any tax firm or law office in any way . I just hate to see green horn traders spend alot of money (like I did)and create alot of book keeping that may not be that benifical. Good Trading to all GB
Good advice, you always have to ask yourself who and what qualifications does the person you are listening to on a chat room like this have. Generally for a first consultation (to get to know each other, and no real technical advice) a CPA firm will not charge you anything. Because of liability concerns they are not going to help you fill out your own return, they need to be in control of the situation, however you should first ascertain if the accountant you are talking with is versed in trading, a few questions about M2M and Fores Trading in general (remember to ask about sec 988 trades as well as sec 1256 trades.) will let you know if the guy/gal knows what she is talking about.

As a side note I will be in Houston on Saturday of this week giving a short talk on the taxation of FOREX. If you are interested in attending give me a shout by email, and I will put you in touch with the right person at the FOREX club there. Traders Accounting. Jim Crimmins 02/12/07
Quoting jonesla9
Hey Trader Tax,

Earlier inthis thread I noticed you said it was not a good idea to have a one person LLC, while what about a single person C corp.? would that not be a good idea as well? Thanks
Goof question. A single member "C" corporation is fine since it is a separate taxpayer in itself, however make sure that it makes sense for you to use a C corporation to trade in, for some traders it does, however for many it does not. Traders Accounting. Jim Crimmins 02/12/07
Quoting Trader Tax
Goof question. A single member "C" corporation is fine since it is a separate taxpayer in itself, however make sure that it makes sense for you to use a C corporation to trade in, for some traders it does, however for many it does not. Traders Accounting. Jim Crimmins 02/12/07
Should have read good question, sorry. Crimmins
Hello,

I started Forex trading last year and I lost some money ($5,000).

My question is, SHOULD I (OR DO I HAVE TO) REPORT THEM on my taxes?

Also, what should I use, 1256 contracts or Sec. 988 trades?

I really apprecaite any help.


Thanx in advance!
Quoting shleimun
Hello,

I started Forex trading last year and I lost some money ($5,000).

My question is, SHOULD I (OR DO I HAVE TO) REPORT THEM on my taxes?

Also, what should I use, 1256 contracts or Sec. 988 trades?

I really apprecaite any help.


Thanx in advance!
That answer depends on how much you made trading forex for the previous year.

If you want a fast answer, you should email the tax expert in person. He does not visit this thread often.

Here is his email address: [email protected] .

Good Luck!
Quoting shleimun
Hello,

I started Forex trading last year and I lost some money ($5,000).

My question is, SHOULD I (OR DO I HAVE TO) REPORT THEM on my taxes? CRIMMINS: ABSOLUTELY, UNLESS YOU WANT TO LOOK OVER YOUR SHOLDER FOR THE NEXT THREE YEARS TO SEE IF THE IRS IS GAINING ON YOU.

Also, what should I use, 1256 contracts or Sec. 988 trades?CRIMMINS: WHICHEVER THEY WERE, ASK YOUR BROKER IF YOU DO NOT KNOW.

I really apprecaite any help.

Thanx in advance!
CRIMMINS: YOU ARE WELCOME. TRADERS ACCOUNTING 02/27/07
Quoting forexplayer
Hi,
I have a question there. What tax software are you talking about. I know HRBlock does not have the 6781 form in their online product. Turbotax has the 6781 , but it almost looks like you have to list all the trades you took? I haven't received a 1099-B or any such form from any of my brokers, so can i instead sum up the profit/loss i had at each broker and list as a single line item? Thanks for your help, i would really not like to enter all those 100's of trades line by line.

Regards

Me neither an I am getting frustrated trying to find an answer. For 6781 Turbotax wants me to list all of my trades. Do i have to do it or not??
PipMasterFlex
No you do not have to list each trade individually. List each of your accounts in part 1 line 1. If the software wants trades you can summarize them with one entry using "various" as the purchase and sell dates and just enter the total gain (or loss) for the year for the account.

Hope that makes sense...

Jim
Quoting forexplayer
Hi,
I have a question there. What tax software are you talking about. I know HRBlock does not have the 6781 form in their online product. Turbotax has the 6781 , but it almost looks like you have to list all the trades you took? I haven't received a 1099-B or any such form from any of my brokers, so can i instead sum up the profit/loss i had at each broker and list as a single line item? Thanks for your help, i would really not like to enter all those 100's of trades line by line.

Regards
If you are trading Forex Futures, you do not have to list all of your trades, if you are trading 988 trades and opting out,yes you do have to turn in a log showing that you did opt out of each trade converting them to 1256 contracts. Your broker is required to give you some type of documentation for the IRS. It used to be that they were not, but now they are. 03/08/07 www.tradersaccounting.com Jim Crimmins
Quoting bookfixer
No you do not have to list each trade individually. List each of your accounts in part 1 line 1. If the software wants trades you can summarize them with one entry using "various" as the purchase and sell dates and just enter the total gain (or loss) for the year for the account.

Hope that makes sense...

Jim
Jim, I do not know what your credentials are, nor where you are getting your information, but you must be more careful, as you are misleading people who are trading FOREX. Remember there are both Cash Forex and Futures Forex, each of which are taxed differently and require different substantiation. FOREX is the "wild west" of taxation, so do be careful in what you are telling people. 03/08/07 www.tradersaccounting.com Jim Crimmins
Quoting bookfixer
No you do not have to list each trade individually. List each of your accounts in part 1 line 1. If the software wants trades you can summarize them with one entry using "various" as the purchase and sell dates and just enter the total gain (or loss) for the year for the account.

Hope that makes sense...

Jim
Thank you very much Jim, that makes perfect sense. I feel a lot better now.
PipMasterFlex
well after reading the last post, now i'm not so sure anymore
PipMasterFlex
ISU, I hope you read TaxTraders' post right above his. Are you sure Jim's facts are correct?

Quoting isufreak24
Thank you very much Jim, that makes perfect sense. I feel a lot better now.
Quoting mrmikal
ISU, I hope you read TaxTraders' post right above his. Are you sure Jim's facts are correct?
ya i read TaxTraders after Jim's, and it brought me back down to earth
PipMasterFlex
On dailyfx, this conversation happened between about forex taxes.

abc123-reporting forex on 1040 Suppose one decides to report forex gains/losses on 1040 as ordinary income/loss, you would report that as "other income" on line 21. Do you need to include anything with the tax return to support this? Should you use the "mark to market" procedure for any outstanding positions at the end of the calendar year or are they reported when you have closed the position (probably the following year)?

green trader tax-Yes, forex ordinary gain or loss per broker is reported in a summary fashion on line 21 of Form 1040. If you use the performance record formula for calculating the gain or loss, that includes mark-to-market accounting.

The law is unclear about whether to use MTM or cash on spot forex.

Currency101
So you only need to fill this line out, not worry about entering all the individual transactions like you would in stock trading? I'm new to forex, and this is the first year that I deal with forex tax. Please be specific as much as you can.
Green Trader Tax-Correct, summary reporting is allowed for forex.


I am assuming that if you list it as "other income" on 1040, this would considered doing it the 988 way? Is GreenTrader_Tax's information accurate, he makes no mention to the difference between cash forex or futures?
PipMasterFlex
OK, i've been doing some more research on this issue, and because I have a loss on the year (not bad though, i'm turning a profit in '07!) i am not going to elect out of 988. I believe i am going to list my loss on line 21 "Other Income", which would make my loss subject to 988 gain/loss rules. Now, the only thing i really have left to figure out is if I need to attach a list of transactions or not. ?
PipMasterFlex
isufreak24

Is your loss more than what you would gain by electing out?

Good Luck!
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