i am a forex day trader,how would i show losses and winnings on your tax platform

vs3115
vs3115 Member Posts: 1 Newcomer
in Filing my taxes

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  • KristineS
    KristineS FreeTaxUSA Agent Posts: 177

    Hi vs3115,

    Thanks for your question.

    Forex trading (also known as section 988) is reported as ordinary gain or loss.

    In FreeTaxUSA this is reported under INCOME > Other Income > Miscellaneous Income (located at the bottom of the screen). You will report the aggregate gain or loss for the year on the 'Your Income Description 1' line. An example of what you could write might be 'Net Section 988 Gain' or similar wording.

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  • bmrbenzbetnli
    bmrbenzbetnli Member Posts: 1 Newcomer

    Hello @KristineS,

    I have a similar question as above as a qualifying active day/options trader.

    In previous years, I have filed a Schedule C as well to deduct business expenses for trading as a sole proprietorship. I'm concerned that reporting it as miscellaneous income detaches it from being related to the SP business in the eyes of IRS.

    The last time I used a tax preparer (H&R), they summarized my trading in form 4797 - Sales of Business Property instead, under part II - ordinary gains and losses. Wouldn't this be a better way of reporting? However, I tried entering such asset (date sold, cost basis, sales price) yesterday under my SP business entry with no luck in figuring out how. There isn't a way for me to manually enter this on the form either through the software. Any advice? TYIA

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  • PhillipB
    PhillipB FreeTaxUSA Team Posts: 69
    https://community.freetaxusa.com/discussion/comment/3768#Comment_3768

    Hello,

    From what it sounds like, you are asking about a different kind of trading. Options traders would either report their gains and losses on Form 8949 and Schedule D, or if they file a timely mark to market election, they would use Form 4797 as your former accountant did.

    Forex traders generally report their aggregate Section 988 gains on Schedule 1 as an other income item.

    Let us know if there are additional questions or concerns.

    Thanks for using FreeTaxUSA Community

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  • KristineS
    KristineS FreeTaxUSA Agent Posts: 177

    Hi bmrbenzbetnli,

    Thanks for your question and welcome to our FreeTaxUSA Community.

    As a trader, your gains/losses are reported on Schedule D and your expenses are reported on Schedule C.

    You'll need to make a valid market-to-market election to not be subject to wash sale rules. More information is found here on IRS Tax Topic 429.

    You might like to consider upgrading to the Pro Support level of service to get professional help. Pro Support will be able to look at your account and give you more detailed instructions.

     

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