Tax Loss Write offs with Foreign Brokers
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Thread: Tax Loss Write offs with Foreign Brokers

  1. #1
    I'm using a lot of trouble finding information on filing taxes when trading forex using an international broker (outside the US). Most info seems to come from only 1 source, Greentradertax; difficulty is they don't do taxes or offer much advice for foreign accounts / brokers.
    When I started trading a year ago I thought most folks used broker accounts outside the US... Guess I was wrong.

    Anyway I had a massive loss in 2017 and I'm wondering if it's worthwhile to write them off on taxes under sec 988. Has anyone here written a forex loss off based on their non US broker account? Was the resulting audit a very simple verifiion of documents and also fund transfers or did you need expensive lawyers? In my simpleton comprehension one shouldn't need lawyers unless there's fraud or evasion, but these conditions I envision are subject to irs interpretation considering there's always a plethora of too complex laws we don't even know exist. Additionally wondering exactly what form to write off sign supplier fees, since they'd most likely be different than where inventory commissions are lined. Anyone know great accountants that do foreign brokers?

  2. #2
    I am a little bit hesitant to write about your situation because the topic do not apply to the most US small retail traders.
    Since approximately 2010-2011, not lots of REPUTABLE foreign brokers accept US retail clients. Said REPUTABLE.

    Will be a Completely Different subject. Whether you treat them as ordinary income/loss or capital gain/loss will
    be depended upon several facets. Volume, amount, frequency, what kind of assets, how you structure your trading organization,
    your additional incomes, in which you have your accounts, how you deposit and get the payment, etc, etc,etc..
    There are lots of experts and references you can find.

    - MY MAIN CONCERN for FX traders and Coinbase traders using overseas accounts out of USA:
    FATCA reporting with IRS Tax return F8938 (Single $50k, Couple $100k)
    FBAR reporting with FinCen F114/BSA E-filing (more than $10k)

    OECD nations began CRS reporting and will be fully implemented at the end of the year.
    I maybe wrong but USA isn't currently reporting or receiving and expected to join.

    Considering that bitcoin went pretty much a year ago, we'll hear lots of horror stories about taxation reporting or audits later this year.
    The most important problem for the traders will probably be your IRS auditor or your so called experts do not understand much either
    because these are fairly new and infrequent and evolving subjects for the a lot of them.

    If you discover a problem, be sure to file 1040X asap.
    Most importantly, keep a good, comprehensive records of all of your money or trading transactions in file.
    IRS usually start with the total quantity or deposit sum. You have to have the ability to explain in details to avoid big headaches.
    I anticipate a lot of laws will be evolved and implemented by approximately 2020 (Particularly if Trump becomes 2nd term president in 2020).

    Greatest Pip Wishes!

  3. #3
    Im not going to do anything more complied than that I have to. Im not submitting Trader Status, or 1256 contracts election. Just 988 outline reporting.

    I figure I'm worried that,

    1. Since foreign brokers dont report to the IRS, the IRS wont take my account announcements severely since these statements will be coming only from me, of which they don't have any reason to believe that I did not devise them.

    2. That they might try to give foreign-forex casino treatment rather than FX treatment since it US FX regulation.

    3. They might try to treat these accounts similiar to banks in their Bad Banks list.

    3. Some people are saying to not send documents / documents to the IRS. I really don't know this, wouldn't that be the very best way to demone my case without looking too suspicious right off the top, considering that I don't have anything to hide?

  4. #4
    The loion of the broker does not matter. The question you need to answer is whether you qualify for trader tax status. If not, you report the reductions as income on your 1040. Line 21 or anything like this. There is an article on the greentrader website about it. I reported a small reduction this season and I really do possess an offshore broker. Haven't heard back from the IRS though.

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