Retail Forex traders fall under Section 988, which covers short-term foreign exchange contracts like spot Forex trades. Section 988 taxes Forex gains and losses like ordinary income.
You do not report your Forex loss on form 8949 which is for Capital gains and losses.
Forex gains and losses are reported on your tax return as Other Income. A loss is reported as a negative number.
To report your Forex loss, please follow these steps:
- Click on Federal
Taxes, then on Wages and
Income
- Under All Income, locate the Less Common
Income section
- Click Show more and click Start next to Miscellaneous
Income at the
bottom
- On the next page, click Start next to Other
Reportable Income
(see attached screenshot).
- Describe your loss as Section 988 Forex loss and enter a negative number for your loss.
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