topic How do i report foreign exchange losses ? in Deductions & credits

How do i report foreign exchange losses ?

tyasiak7 — Mon, 27 Jan 2020 21:43:51 GMT

Re: How do i report foreign exchange losses ?

DawnC — Mon, 27 Jan 2020 22:26:43 GMT

Foreign exchange (Forex) traders fall under Section 988, which covers short-term foreign exchange contracts like spot Forex trades.

Forex gains and losses are reported on your tax return as Other Income. Report a loss as a negative number.

To report your Forex loss, please follow these steps:

Click on Federal Taxes (left menu) then on Wages & Income/Income & Expenses (up top)
Under All Income, locate the Less Common Income section
Click Show more and click Start next to Miscellaneous Income, 1099-A, 1099-C at the bottom
Click Start next to Other Reportable Income
Describe the amount as Section 988 Forex gain or loss (enter a negative number for a loss)

Foreign Exchange Reporting Discussion

Re: How do i report foreign exchange losses ?

geauga — Wed, 24 Mar 2021 02:53:22 GMT

Thank you, Mr. Dawn for your help. I will try on Turbo and then give my comments.

Another pending issue is: where do I enter additional foreign tax credit for additional taxes paid in 2020; when income on sale of flat and foreign tax credit was filed in 2019. If I enter this additional foreign tax credit on form 1116 without any income from sale of flat in 2020, I get nothing because 1116 uses ratios. Is there any other place where I can enter additional tax paid in foreign income?

Re: How do i report foreign exchange losses ?

MarilynG1 — Thu, 25 Mar 2021 03:32:24 GMT

@geauga You could Amend your 2019 return to add the additional Foreign Tax paid on the 2019 income.

Re: How do i report foreign exchange losses ?

initialt — Tue, 18 Apr 2023 01:28:53 GMT

My currency trading is a loss for 2022.

Example, I entered "IRC 988" for description, "-$50,000" for taxpayer amount under Misc. Income; other reported income section

My question is, does this apply for Federal and certain State, such as California ? because under the State of California reporting, Misc.; Other Adjustment to Income; do I enter the same for Federal the -$50,000 loss?

Re: How do i report foreign exchange losses ?

Cynthiad66 — Tue, 18 Apr 2023 16:01:59 GMT

Per our Expert DawnC, Forex gains and losses are reported on your tax return as Other Income. Report a loss as a negative number.

To report your Forex loss, please follow these steps:

Click on Federal Taxes (left menu) then on Wages & Income/Income & Expenses (up top)
Under All Income, locate the Less Common Income section
Click Show more and click Start next to Miscellaneous Income, 1099-A, 1099-C at the bottom
Click Start next to Other Reportable Income
Describe the amount as Section 988 Forex gain or loss (enter a negative number for a loss)

Re: How do i report foreign exchange losses ?

kas123 — Sat, 20 May 2023 19:50:11 GMT

Hi,

How do I carry this over to the NIIT form? Basically have around $100K in 'interest' from foreign government bonds, but it is offset by approx $100K in that country's currency depreciating. So in USD terms made ~$0 round-trip (USD->forex->bond->forex->USD).

Even if I add the loss as negative income, TurboTax wants me to pay ~$3k in NIIT. But as far as I can tell, treasury regulations clearly say "... foreign currency gain or loss that otherwise is not subject to the Self- Employment Contribution Act is appropriately treated as net investment income. ". So my understanding is I should be able to adjust the NIIT to deduct the loss.