I lost money trading foreign currency through OANDA. I have a printed copy from them of my net realized loss but no 1099B

By default, 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, which is at a higher rate than the capital gains tax for most earners. An advantage of Section 988 treatment is that any amount of ordinary income can be deducted as a loss, where only $3,000 in capital gains losses can be deducted. Section 988 gains or losses are reported on Form 6781.

Report the gains/losses in this way:

In TurboTax, open your return and follow these steps:

• Click on Personal, then on Personal Income on top of the screen
• On the next page, click on I'll choose what I work on and on Continue on the following page
• Scroll down to the Less Common Income section
• Click Start next to Miscellaneous Income 
• On the next page, click Start next to Other Reportable Income

This default treatment of foreign currency gains is to treat it as ordinary income.

"Except as otherwise provided in this section, any foreign currency gain or loss attributable to a section 988 transaction shall be computed separately and treated as ordinary income or loss (as the case may be)."

I've included a link to the Internal Revenue Code for your reference:

http://www.law.cornell.edu/uscode/text/26/988

I personally don’t own a business. I just do this as another source of income. I know OANDA is regulated.. I actually use a non regulated broker out of pure ignorance and have access to the total loss amount. I’m guessing this is treated the same way? As I lost $12,000 and am trying to make sure I’m doing the correct thing. I still treat it as “other income” and provide the -$12,000 in the box correct? Thanks in advance!!

Yes, OANDA is a Forex and CFD broker and is regulated by Section 988 of the internal Revenue code.  You would report your foreign currency loss as a Section 988 transaction  and treat it as an ordinary loss in accordance with IRS guidelines. You would report this as other reportable income in Turbo Tax. 

 

Please click here for additional information. Also, you can refer to this IRS document for additional support.  

Thanks for that! Is there anyway you might be able to answer my question as well? Thanks in advance!

Yes, you would represent that income as a -$12,000 and give it a brief description such as "foreign currency transaction loss." Be sure to keep your documentation related to this loss if the IRS questions you about this transaction.