What happens if I don’t pay taxes on my forex profits?
Question by Ted M: What happens if I don’t pay taxes on my forex profits?
My forex broker does not report my trading activity to the IRS on the 1099 form. Thus, the IRS has no idea how much money I’m making. Can’t I simply pretend I didn’t make anything for purposes of taxation? How will they ever know the difference? No bashing, please. Serious answers only.
Best answer:
Answer by Bash Limpbutt’s Oozing Cyst©
Don’t expect your broker to be doing business much longer if he’s not reporting transactions to the IRS.
When the IRS does catch wind of it — and they typically do sooner or later — you’ll receive a CP2000 letter advising you that you “forgot” to include some income and assessing the tax, penalties, and interest. Most likely their tax calculations will be wrong (much too high) so it behooves you to play it straight from the git-go.
Give your answer to this question below!
Forex is nasty.
The laws assume that you have relatively minor exchange issues and don’t make your broker list them on a 1099-B.
Unfortunately for you, that doesn’t mean you can ignore them. Some contracts go on form 6781 and then to schedule D. Other contracts go line 21. Either way, you MUST list them.
There’s a recent court case last week where a partnership decided to not list everything…and yeah, they are in court for income tax evasion, since they grossly underreported their income, the statute stayed open for 6 years and now they owe.
Ouch =)
Income tax issues are different for every person. Your best bet is to consult with a tax specialist. But you probably already know that and came here to get a feel for what he or she will tell you.