Paying Taxes on Earnings?

Beginner Questions
1

Hi,

I just started trading this month, and I have started thinking about the tax season in 2011. I’m wondering around how much I might owe next year from my earnings (presumably) this year, and what exactly determines this?

I’ve heard that Forex traders typically pay somewhere from 25% to 33% of their earnings? Is this accurate? Is your tax bracket determined by how [I]much[/I] you made through trading during the calendar year, or are there other factors?

Also, I’m wondering whether or not it matters who your broker is? For instance, I am using U.S.-based ECN broker. Would it make a difference at all in how much taxes you owe if you were to use overseas brokers, such as UK or Swedish brokers, assuming your earnings were the same monetary amount? Does the fact that your broker is regulated by the CFTC/NFA have any impact on taxes?

I do not anticipate that I will have a second source of income to worry about when filing for this year, aside from trading.

Thanks!

2

Unless your trades last over a year your FOREX profits are treated as short term capital gains, which are taxes as regular income. Thus the amount of taxes you pay on your Forex profits is determined by your tax bracket.

This is the reason why you had to submit a W-9 form to your broker when you opened an account. They use it to notify the IRS as to how much you made.

3

where from i can start trading

4

Really? That’s weird, because I just signed up with MB Trading last month, but I don’t recall submitting any such forms to them? They definitely didn’t require me to mail or fax them any tax-related information, aside from my SSN. :confused: