Hello all. not new to trading but new to taxes for them.
Question is, do I have to pay taxes on money that I deposit into my trading account with Oanda if I don’t make any withdrawals from the account, or if I don’t make any money with it.
What country are you based?
United states
any money i deposit into my account when i first got started was already tax from my job i had at the time
Depositing money into a forex trading account is NOT a taxable event. For tax purposes, it’s no different than depositing the same amount into a credit union, or an IRA account.
If the money is your money, and if there are no prior taxes due on it, then you can move it around all you like, without incurring a tax liability.
However, if the “money” you deposit is cryptocurrency, be aware that you will be triggering a special reporting requirement. For details on that, see the second half of this post.
Forex taxes at a glance
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If you deposit USD into a forex account in the U.S., you need not inform the IRS about your deposit.
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If you deposit USD into an offshore account, you need not inform the IRS about your deposit, UNLESS you have a total of $10,000 or more parked in offshore financial accounts (including bank accounts, forex accounts, etc.), in which case you must file a special form revealing all of your offshore accounts and how much money is in them.
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If you suffer an overall loss (for the year) in your forex account, you need not report it on your tax return, but you probably will want to do so for the tax benefits involved.
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If you earn an overall profit (for the year) in your forex account, you will be required to report it on your tax return, and pay the relevant tax.
Here is a simple way to handle forex taxes, if you choose to figure your own tax liability, and file your own tax return –
Keeping Track: Your Performance Record
Rather than rely on your brokerage statements, a more accurate and tax-friendly way of keeping track of profit/loss is through your performance record. This is an IRS-approved formula for record keeping:
• Subtract your beginning assets from your end assets (net)
• Subtract cash deposits (to your accounts) and add withdrawals (from your accounts)
• Subtract income from interest and add interest paid
• Add other trading expensesThe performance record formula will give you a more accurate depiction of your profit/loss ratio and will make year-end filing easier for you and your accountant.
That’s an excerpt from an INVESTOPEDIA article titled How FOREX Trades Are Taxed
The IRS and cryptocurrency reporting
If the “money” you deposit into your forex trading account is cryptocurrency, be aware that the IRS now requires that you answer “yes” to the following question, added just this year to the 2019 Form 1040 (the basic tax form for individuals):
“At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”
The word “send” in that question would apply to depositing crypto into your trading account, regardless of where you sent it from. In other words, if you send crypto from your account in Coinbase, or from your own wallet, or from anywhere else, you have to answer “yes” to the IRS question, setting yourself up for possible scrutiny or audit.
If you buy, sell, send, or receive crypto, and then answer “no” to that question, you might get away with it. But, if you are ever caught by the IRS, you will be in a world of hurt.
If you fail to answer the question, your tax return will come to a screeching halt at the IRS, and you will be flagged for special attention.
This IRS question represents an egregious intrusion into personal privacy. And it could very well be the proverbial “camel’s nose under the tent”. Imagine how that question could be expanded in future years.
Imagine if that question appeared on the 2020 Form 1040, expanded as follows:
“At any time during 2020, did you receive, sell, send, exchange or otherwise acquire any financial interest in any of the following:
- stocks
- bonds
- real estate
- gold, silver, or other precious metals
- diamonds, or other gemstones
- antiques or collectibles
- firearms or ammunition
- foreign currencies
- cryptocurrencies
- copyrights, trademarks, or other intelllectual property
- any other property having a fair-market value of $1 or more
The IRS claims that the rationale for the crypto question on the 2019 Form 1040 is that cryptocurrency serves no legitimate purpose, but is only used to launder dirty money, or evade taxes. Apparently, this has not caused an uproar among citizens of the U.S. However, I suspect that most of the items on the hypothetical list I suggested above – if included on a future tax form – would cause more than just an uproar.
But, any sort of “national emergency” or “economic crisis” could be used as a pretext for “temporarily” requiring Americans to report transactions involving some, or all, of the items listed above. And such “temporary” measures, when taken by the government, have a way of becoming permanent.
There’s a reason why we have a Second Amendment. And, I guess there’s a reason why the people of this country own 300 million firearms.
End of rant.
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very informative post by @Clint… I would only add that if you park your money at Oanda and not trading for 1 year, then you’ll get inactivity charges. Thus you need to trade at least a bit .
Thank you for all the posts guys. This helps alot!
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