If you are new to the forex market and are wondering how to file taxes, you are not alone. The retail forex market is booming and the IRS is lagging behind in many ways, including its taxation. While there are some common rules regarding forex tax reporting, these rules may change at any time. Before filing your taxes, be sure to consult a tax professional. There are two main sections of the tax code relating to forex trading. In most cases, you ll be taxed on your profits under section 1256, which follows the 60/40 capital gains treatment.
If you re not registered with the Commodities Futures Trading Commission, you ll still need to file taxes on your income. Most traders must choose their tax situation by Jan. 1, although new traders can choose their tax situation before they make their first trade. Regardless of your tax situation, it s important to keep good records for your trading profits. This will help you save time and money as tax season approaches.