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Forex Taxes

  • #181
  • Mar 27, 2007 3:00am Mar 27, 2007 3:00am
Quoting jasdel
But I know that tax is not "40% no matter what income bracket you're in".
http://www.fin.gc.ca/gloss/gloss-t_e.html#cap-gains

I'm also quoting 40% from the trader who got me on to Forex (he has been donig this for just under 10 years now).

One thing we all agree on though, a public forum isn't where you should be getting this advice.
  • #182
  • Apr 4, 2007 7:13pm Apr 4, 2007 7:13pm
Is a trader required to pay tax on the spread, the part of the trade the broker keeps...Thanks
  • #183
  • May 6, 2007 11:38am May 6, 2007 11:38am
Quoting Trader Tax
If you get four traders talking about taxation you generally get five opinions, 3 and 1/2 of which are not completely correct.
Probably because most never earned a profit to have to worry about it
  • #184
  • May 7, 2007 8:46am May 7, 2007 8:46am
Quoting mdetlh
Hi
I'm hoping to trade currencies later this year. I've only seen one broker with tax information. I got a trader tax book which is generally helpful. I want to open an account with $5k. Anybody care to share good or bad experiences with their taxes? Is an LLC good for this small amount of cash? Does trading with a swiss firm help with avoiding capital gain taxes or does it become a hassle?
I appreciate your input.
Feel free to visit our website www.tradersaccounting.com, there is a lot of good free information there as well as some good reference cd's and other items. If you have any specific questions about taxes do not hesitate to put it on this chat room, we will get you an answer. Jim Crimmins Traders Accounting May 17, 2007
  • #185
  • May 7, 2007 8:50am May 7, 2007 8:50am
Quoting nikim
what is a "1256 status as a forex trader"?
great question, there is no such thing. What the trader was trying to say, is that on his trades of forex futures they are taxed at IRS section 1256 rates, and probably was also trying to say that if he is trading spot forex, he is making the individual election with each trade to convert it from section 988 to section 1256. Section 1256 allows capital gain at a 60% long term and 40% short term tax rate, which overall for most of us is a 30% or so savings in taxes.
  • #186
  • May 7, 2007 8:52am May 7, 2007 8:52am
Quoting mdetlh
From what I gather here, the tax book and a broker's web site, I aim for the 1256 status as a forex trader.
I think the last question I have pertains to whether or not I can keep a standard deduction of 6 in the household = about $18000 or if I start itemizing everything once I start trading.(Can I keep the standard deduction and attach the 1256, the 6781?requirements whether I gain or lose from the $5k amount?)
I don't need to worry about trader versus investor status cause I only want to trade forex. So whatever input I get here, I check out with an experienced trader CPA when taxes are due and I won't bother with trying to trade through a Swiss firm.
Thanks all,
You will continue to be able to claim your standard household deductions, however if you have a lot of expenses surrounding your trading, you must be trading as a business to deduct most of them. again please see our website, it will give you a lot of great information. www.tradersaccounting.com. may 7, 2007 Jim Crimmins Traders Accounting.
  • #187
  • May 7, 2007 8:56am May 7, 2007 8:56am
Quoting irusoh
Don't worry about LLC with smal trading amount.
LLC is Limited Liability Company and is opened to avoid personal liability as well as to create a partnership sometimes. Neither applies to forex trading unless you work with somebody else or giving out trading advcie or something.
Swiss account won't save you anything on taxes. You still have to report your gains to the IRS.

Unfortunately this post is error prone!. An LLC might do any trader good, by allowing them to write off their business (trading ) expenses without fear of an audit, also it allows them to fund a retirement plan if they have a successful year trading, this in turn increases the amount that can be written off, and that my friends is the name of the game. CASH FLOW, always be looking for ways to improve it to keep more $$ in your trading account. Being able to write business expenses off is one of the best ways other than becoming a better trader to increase your CASH FLOW! Traders Accounting. May 07, 2007 Jim Crimmins
  • #188
  • May 23, 2007 11:39am May 23, 2007 11:39am
When doing my schedule C, I can see this is going to be a pain.

1. How do I handle profit/loss from cross pairs such as GBPCHF

2. Must I list every transaction or can I just lump all EURUSD trades...like ok I bought and sold X amount of EUROs so I made this amount of money.

3. Can you deduct interest or commission charges?
  • #189
  • May 23, 2007 10:40pm May 23, 2007 10:40pm
Google "Greentrader Tax"

They have a large website and they specialize in forex. I found enough info there to file my own taxes. If you get stuck you can contact them. I believe they also sell a DVD course in forex taxes. Good Luck. Glad mine are done!
  • #190
  • May 29, 2007 2:40pm May 29, 2007 2:40pm
hello. i am 24 years old. i got in the market a year ago after taking a course because I needed to find means to provide for my college education. i initially put up $5000, it then went up to a maximum of $8000 and it dropped down to $2000. hopefully i will find a way to increase my capital.

am i obliged to pay any taxes for my loss trades?
am i obliged to pay taxes even though i did not withdraw funds from my broker.

i am from Toronto/Canada

thank you.
  • #191
  • May 29, 2007 2:44pm May 29, 2007 2:44pm
I'm not Canadian so I probably shouldn't bother responding to this because I have NO knowledge of Canadian tax laws (or any other Canadian laws). But what government would tax your losses?
  • #192
  • May 29, 2007 3:00pm May 29, 2007 3:00pm
If I understand it right you if you file a something something form you can use that loss as a tax right off, at least in the US.

You can tell I know a lot about taxes.

Probably better off in Cad as far as taxes go too, US pretty much takes everything. I figured after inheritance tax they generally end up with 2/3-3/4 of what you make in a life time. How they can be at such a negative deficit is beyond my reasoning.
  • #193
  • May 29, 2007 3:23pm May 29, 2007 3:23pm
Quoting wildfire888
hello. i am 24 years old. i got in the market a year ago after taking a course because I needed to find means to provide for my college education. i initially put up $5000, it then went up to a maximum of $8000 and it dropped down to $2000. hopefully i will find a way to increase my capital.

am i obliged to pay any taxes for my loss trades?
am i obliged to pay taxes even though i did not withdraw funds from my broker.

i am from Toronto/Canada

thank you.
Do you have a US or EUR based broker? I somehow doubt you are with a Canadian broker. So I'm going to assume your account is in USD. Your $2000 may be worth a little bit more than that since the USD continues to weaken so when you convert your USD back into CAD, you get 94 cents back instead of 88 cents or whatever

I don't know the answer to your question is. But I do know that, in Canada, you can only apply a capital loss against a capital gain in the same taxation year. But you can use a capital loss in future years (up to X years) against a new captial gain. Therefore you must have a capital gain so you can apply your capital loss. Understand?

Saying that, don't you have to pay tax on each individual transaction? In my opinion, you should really talk to an accountant. Not only do you have to deal with each individual transaction, but you have to deal with the gain on the CDN $.
  • #194
  • May 29, 2007 3:30pm May 29, 2007 3:30pm
Hi Wildfire,

I'm in Canada too, and am trying to find out how to treat Forex losses/gains. Doesn't seem to fall under the Capital Gains section since it isn't property or shares, but so far I'm at a loss () as to how to treat it...hopefully there are some Canadians out there who can help?
  • #195
  • May 29, 2007 4:18pm May 29, 2007 4:18pm
thank you guys.

i am with an american broker named itradefx
  • #196
  • Jun 3, 2007 5:14pm Jun 3, 2007 5:14pm
Hi I just want to ask everybody what's their views and experiences when paying taxes for all the gains of their forex trading activities.

Is it worth putting up your own home-based business/company and making you as employed by your own company? i.e. for some tax advantages/benefits.
  • #197
  • Jun 3, 2007 6:14pm Jun 3, 2007 6:14pm
I'm starting to look into the LLC route myself... if you haven't read this thread yet... it would be worth your time...

http://www.forexfactory.com/showthread.php?t=8177
  • #198
  • Jun 5, 2007 3:36pm Jun 5, 2007 3:36pm
a pain the first year? try every! lol but on a serious note, their not bad at all, just contact your broker for the information and give it to your accountant. Thats all I need to do at least.
  • #199
  • Jun 5, 2007 5:08pm Jun 5, 2007 5:08pm
Taxes suck in any year!

There is different laws depending on the country you live in. Here were I live you can deduct expenses, 28% of interest can be deducted from tax and you also have the ability to carry forward loss and deduct a % from taxes. The rules are a bit different in different country's, but not THAT different. Some places you might have to establish your own firm (a micro firm maybe?) to get the full rights.

Plain and simple: there is a lot to gain if you know what to do. Talk to an expert in accounting in your country so you can be sure you are not getting ripped off more than needed. If you are serious about this, you are actually an idiot if you don't talk to somebody with indepth knowledge in accounting.

Good luck, you will need it.
  • #200
  • Jun 6, 2007 9:00am Jun 6, 2007 9:00am
On our website we feature a CD that once listened too will answer both of your questions. It is Tax Secrets for Traders, Forex edition. Many Forex traders trading the same amount you have do form LLC's to trade in, but there is no cookkie cutter approach to this, so without more information from you i would have no idea as to whether or not it made sense for you to form a business to trade in. You can fill out a confidential questionnaire on our web site which will provide us the information which we can use to create a free 40-page report that will be snail mailed to you. This is a very good report as part of it will be personalized to you. Forex trading is the wild west when it comes to taxes, so be sure you know what you are doing. 05/06/07 Jim Crimmins Traders Accounting www.tradersaccounting.com
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