Hands off AI forex trading by a company.

[CHSSC1]

I opened an account with a company that trades Forex with AI for me.

I registered it under my (single member) LLC and it had a startup fee.

1) Is the startup/consulting fee that was asked to work with that company a deduction and where do i enter it?

2) For income and losses, for section988, can I take my profits minus my loses and put that number or do they have to be entered separately? and

3) Where do I add the Forex income in the Turbotax home and business Windows desktop edition? Under Business Income>Other Income? or elsewhere? since the securities company is offshore, they don't give a 1099 or tax documents. 

4) The securities trading company where my funds are is held offshore, does Turbotax has the fill-able form 8938 (FATCA) forms in it?

[DaveF1006 · Accepted solution]

Yes, you can deduct the start-up expenses in the business section of your return. Since you registered this account under your LLC, the startup or consulting fee is generally deductible as a Business Expense. 

1. Where to enter: In the Business tab, go to Business Expenses > Other Common Business Expenses.
2. Specific Category: You can list it under Professional Fees or Legal and Professional Services. If it was strictly a fee to set up the trading software/AI access, you can also list it in Other Miscellaneous Expenses with the description "AI Forex Software/Consulting Fee."
3. If the fee was paid before you actually began trading or doing business, it may be considered a "Startup Cost" (subject to $5,000 immediate deduction and amortization for anything over that). 

Forex trades can never be reported as income from self-employment because these are an investment and not money earned from self-employment. Instead, the income is reported in the following manner.

1. Select Wages & Income > Less Common Income > Miscellaneous Income, 1099-A, 1099-C.
2. Choose Other reportable income (the last option).
3. Description: Type "Section 988 Forex Gain" (or Loss).
4. Amount: Enter your net profit or net loss (use a negative sign for a loss).

Yes, TurboTax Home & Business Desktop includes Form 8938.

1. Go to Federal Taxes > Other Tax Situations > Other Tax Forms > Prepare a report on foreign financial assets. 
2. You only need to file Form 8938 if your offshore account balance exceeds $50,000 on the last day of the year (or $75,000 at any point during the year) for single filers. These thresholds are higher for married filers ($100k/$150k). 
3. Don't Forget FBAR: If the total of all your foreign accounts exceed $10,000 at any time, you must also file an FBAR (FinCEN Form 114). TurboTax does not file the FBAR for you. You must file it separately (and for free) on the FinCEN BSA E-Filing website.

One last note. This may be the only year you will file a Schedule C to claim the start-up expense. Since there is no earned income being generated by the LLC, the IRS won't allow you to keep deducting expenses without earned income. Remember, Forex trading is investment income and not earned income.

[CHSSC1]

Thank you! that helps greatly

One more thing. where do i report the Performance fees? under the business or personal tab?

[DaveF1006]

You can put it in other miscellaneous expenses and call it Performance Fees.