On what grounds? The US government doesn’t have to have a good reason to make your life miserable. The IRS does it to people all the time. They don’t even understand their own rules!
We can sit here all day long and talk about how we’re not doing anything illegal. We can pick apart the wording of the legislation and find what we think are loopholes. I’m willing to bet that most of us are not lawyers so we have no real understanding of the law (or whatever it is). The fact is - if Uncle Sam wants to come after you they will. It doesn’t matter if you think you can justify your actions are not. When it comes to taxes and money in general you’re guilty until proven innocent - in the US.
My point is that if you don’t claim the earnings then you’re breaking the law. I’m not saying that by claiming your earnings they’re going to bring the hammer down on you. However, I do think that you’re putting yourself out there (if you’re using an offshore broker). If they do want to come after you then they will. Guilty until proven innocent. Proving yourself innocent will cost a lot of money. Is it worth it?
I had a consult with the GreenTraderTax guy (before I knew that this legislation existed) and when he found out that I was trading with an offshore broker his initial response was that I was breaking the law. Later in the conversation he backed off that stance and stated something to the effect that the law is unclear and no one really knows yet. And this guy is supposed to be an industry EXPERT.
I’m not judging or saying we’re all going to jail. I’m in the same boat. I just brought this up for discussion because everyone is so focused on finding a broker that will accept US customers. Yeah, a lot of these brokers don’t have any affiliation with the US so our government can’t freeze their assets. However, if you’re actually making money and you’re repatriating a lot of funds then you better believe that they can freeze YOUR assets. Notice I said “can” - not “will”. No one knows how this is all going to play out.
We have a problem… I just want to find a solution. The right (legal) solution. Does offshore incorporation provide that? I don’t know. I’m hoping someone who does know can offer some input here.
This is new legislation… give it time. I didn’t say that anyone has been prosecuted. I’m not even going so far as to say that they will ever be prosecuted. But it’s not a good sign when your tax attorney suggests you’re doing something illegal and he won’t support you. We’re going down roads never traveled.
For any American to think that they can outsmart the government - arrogance. It might work for awhile but it will eventually catch up to them.
Especially, when he then backs off and says that in reality the situation is ambiguous. Don’t you find it weird that the US government does not bother to clarify the matter and gives no reason for it?
It gives them room to interpret things how they want when the time arises. We are all powerless to stop them too. People say “go vote and make change!” but it doesn’t matter how we vote. Our government is a machine and it’s already in motion. Voting won’t change a thing. Voting is a joke. It’s the government’s way of making us believe that we citizens still have some level of control in our country. It hasn’t always been this way. The government of today isn’t the same entity that it was 20-30 years ago.
Sorry, didn’t mean to get started on that. Stay on topic 8!
I can give you the name and e-mail address of my attorney in Belize… e-mail me and I’ll look it up for you. It will cost about $2200 to set up the trust. You can also open an IBC for about the same price if you want to sell on the world market. This is what I have. IBC=International Business Corp.
As for voting to get better representation, we already saw in New Hampshire that the electronic voting machines are being rigged. Why should we believe that was just a fluke?
Better to be safe… the best way to not get run over is to get off the road…
8toe, I can understand that you’re spooked by this regulation. We all were when we first learned of it, but you need to take a deep breath and not jump to conclusions too quickly. IANAL, and I haven’t thoroughly read your posts yet, but here are some initial responses to your concerns:
Regarding GreenTrader Tax advice, were you talking to the head of the company, Mr. Green, another accountant, or someone in that legal division? The reason why I ask is my assumption is that you were speaking to an accountant (unless you specifically asked to get legal advice from their tax lawyers). GreenTrader has done excellent work getting many parts of the tax code for traders clarified, but their accountants aren’t the end all be all. And especially when it comes to brand new regulations, their accountants may not give great advice. They specialize in very narrow aspects of accounting for traders, primarily for those on the equities side. Don’t necessarily take what their accountants say about new legal regulations as absolute fact.
I have not read the regulation in full yet. Other people participating in this thread have greater knowledge than I about it. However, based on what I have read about it, there are three primary effects on the Forex market: A) the 50:1 margin reduction we all know of that US regulated brokers must enforce; B) A June 2011 deadline for brokers to “repatriate” their US customers’ accounts to their US subsidiaries; C) A ban on foreign brokers from soliciting US customers.
There could very well be more to it, but as far as I know after studying this regulation for months, the burden is on the brokers to comply with the CFTC, not Forex traders. As far as I currently understand, the regulation does not impose any requirement for US customers to necessarily use US regulated Forex brokers, nor does it impose any penalty on customers who choose to go with foreign brokers outside of the CFTC’s reach. Foreign brokers can’t actively advertise for US customers, but they don’t have to turn them away, either. Now I remember reading a supposition by GreenTraderTax that there may be some precedent for the feds to prohibit US citizens from doing business with foreign financial institutions, but that was speculation and not confirmed fact. To draw an analogy, the feds have been making it more difficult for US citizens to do business with foreign backs by imposing various regulations that cause headaches for the foreign banks in servicing American customers, but they haven’t gone so far as to outlaw foreign accounts altogether. One has to declare to the IRS any substantial foreign account holdings, but it’s not illegal to hold an offshore account.
The telling period in my opinion will be after the June deadline to see if foreign brokers outside CFTC’s reach will continue to open and maintain US customer accounts. If so and if the feds don’t react with some very heavy-handed bullying technique to freak them out, then offshore trading will continue to be an option. My current view is that while the feds can successfully bully brokers with US subsidiaries into compliance, foreign brokers with no legal presence in the US (especially larger ones with clout like Dukascopy) can carry on as usual as long as they don’t specifically advertise to US citizens.
Could they be very heavy-handed and really knock foreign brokers over the head to get them to yield to the CFTC? It’s a possibility but a remote one as AFAIK. They instituted very restrictive regulations for US brokers that are out of step with the rest of the world. I don’t know why they came down so hard - whether or not they truly want to protect US traders or if there is an ulterior motive. Perhaps they think foreign countries will follow suit with comparable regulations. If the foreigners don’t, then I highly doubt the US would force treaty provisions concerning retail Forex on the rest of the civilized world. They’re only now earnestly working to force ACTA on the world (and COICA domestically) to try to put the cat back in the bag over online copyright infringement of media. The MPAA and RIAA cartels are very, very powerful lobbies and they’re still many years late to securing harsh legal penalties for unauthorized movie, tv and music downloads. Whoever is pulling the strings to crack down on Forex isn’t nearly as powerful.
As for how you treat your Forex gains or losses on your tax return, I have a very simple answer for you: If you’re trading using an offshore broker treat your tax situation exactly like you would if you were using a US broker. GTT describes how it’s treated if you’re trading under your own name. If you’re doing it as a business with a business entity, you may use a different strategy. The worst thing you could possibly do would be to worry so much about the status of offshore trading that it would cause you to neglect to report income. Just report your profit or loss as you would with a US broker and be done with it. Unless something really absurd happens, trading offshore isn’t going to be made a criminal offense (remember, what we’re discussing here are regulations on brokers, not criminal statutes); short of that the IRS primarily wants the money it thinks you owe it. Your broker could be on the moon and I doubt they’d care as long as Uncle Sam gets his pay-off from your hard work.
Addendum: I reread your first post on this page and now see you understand that income has to be reported, so I didn’t have to belabor that point. At this stage in the game, there’s nothing that I know concerning these regulations that prohibits US customers from choosing to go offshore. The CFTC and US-based brokers would vastly prefer Americans to stay with American brokers, and the CFTC wants to instill fear in all of us to make us want to not go offshore. But if we go offshore and reputable foreign brokers are still willing to give us service, then they can’t stop us from doing so. Report your accounts and pay your taxes (if any), and go on about your business.
If you can find me solid information that implies US customers are prohibited from transacting business with foreign forex brokers, then my analysis will be different. But this is my long-winded, cold-and sore throat suffering, pre-2011 view.
The person I had the consult with was Mr. Green himself. To be honest, I didn’t much care for the service. I had an agenda that I sent him of things I’d like to discuss, which he totally ignored and went on and on for the entire 30m talking about everything that didn’t apply to me. Very frustrating.
Yes, I will most definitely report my earnings on my taxes. I’m just wondering if there is a better way to structure everything offshore than to trade as an individual with offshore brokers. I’m very much a skeptic when it comes to the IRS and our government. Very paranoid.
Your response is greatly appreciated! Good write-up!
I completely agree with Clint, Trader4Life has shown a real spark of clarity of thought and perception, but I would like to go a step further and recognize something rarely seen, in the physical world we would call it spontaneous combustion, I don’t know what to call it in a world of thought. Look at the list and analysis of brokers that just happened when intelligent people begin to discuss a problem. But I think that we have danced around the real question that has sparked such interest in this subject. Trader4Life pretty much nailed it when he said that
"They instituted very restrictive regulations for US brokers that are out of step with the rest of the world. I don’t know why they came down so hard - whether or not they truly want to protect US traders or if there is an ulterior motive. "
I have to look at this question from a slightly different vantage point, I am a businessman. It just so happens that my business is the forex market as I make trading robots. My trading systems work well within certain parameters. If those parameters change, it does more than effect my trades, it can have an adverse effect on those that use my systems. I have to be more concerned with future events, and especially why they made those changes in the first place. If we can get a glimpse as to why they did what they did then we can answer the broker question without hesitation.
Since I do research into how the forex system works, I don’t doubt that the major banks have a research department as well that does basically the same things I do. It occurs to me that FIFO really only effects grid trading systems. By coincidence the only system that hasn’t lost a trade in the last 3 years was a grid trading system. It could be something as simple as the banks’ research people have identified a weakness in their 90% win ratio and a little payola has brought this all about. In which case their isn’t much more to worry about.
Nothing about hedge trading and grid systems are really of any threat to traders so in what way could the legislation be considered an attempt to protect traders? Who then is it protecting. If we can answer this, we can determine who is behind the changes and why, then we can make a reasonable decision as to what to do about it.
If that spark of intellectual thought is still burning, I think that is the real underlying question to ponder. What was the motive behind the crime?
What’s the problem? USA is collapsing in communist reallignment with Mexico. USA instigated article 5 of the communist manifesto when Congress authorized the FED in 1913. A central bank is pivotal to a communist. Just have your overseas girlfriend/boyfriend open an account for you. Don’t have one? Well then you have bigger problems than the CFTC. Besides, you’ll need a foreign domicile when you bail out of the USA. Paranoid? Well retire in a country like Paraguay with no extradition treaty.
Details of the issue with forexpeacearmy.com and its owner Dmitri Chavkerov (Felix Homogratus) can be found at the fxm8.com forum. :eek:
You can take Kinetic Securities (Australia) off the list. I spoke with them today and they said they are very interested in serving US customers because of the potential volume there but they are still trying to figure out if doing so would be considered “illegal” and if it was, could they be tried in a US court. Etc, etc.
Plenty of time has passed since the new CFTC regulations were adopted and plenty of non-US brokers continue servicing US customers with no restrictions. Has any of these brokers been challenged in court by the US government or is it exactly what I thought - that US laws have no force over brokerage firms with no US presence?
I have been sick and very busy for the last number of weeks, so I haven’t been contributing to this thread. I want to thank all of you who wrote such complimentary things about my posts. I also want to thank the rest of you regular contributors in return for all of your valuable insight and support. Also, Rossiya, I love the way you think and if you look like your avatar then I think I’d like to propose marriage.
Regarding bravehoststamps’s most recent question, a direct answer is that US regulations only effect US brokers and possibly US traders. If foreign brokers want to disregard them and serve US customers based on foreign laws and regulations they can do so. It would take the power of a treaty with a foreign country to make US regulations applicable to a foreign power.
On the other hand, the US has a lot of power and is used to getting its way with foreign countries; foreign firms may be afraid to run afoul of US dictates for US based customers. Some brokers have obviously taken that tact - Kinetic Securities sounds like one given the report just filed by Rex Tradewell, and its one among many based on the foreign broker information in this thread.
On a personal note, I’ve been looking at the various foreign brokers that apparently continue to serve US customers. One feature of FXCM that I really appreciate is the ease of depositing and withdrawing funds. FXCM has a really smooth interface and multiple options for these tasks, and I especially like when they introduced the live web form for withdrawal requests. All other brokers seem to require manual paper-based forms that are much less convenient to deal with. Does anyone know of a broker with an FXCM style live form for withdrawals?
On yet another note, I now see that FXCM at least monitors this thread. I’m wondering if they’ve thought about simply closing down their US branch and withdrawing from CFTC regulation because of the poor business climate created by these draconian regulations. Then they can transfer everyone over to the UK branch. Just a thought.
Interesting development. I could easily foresee this backfiring on the feds if one of the firms chooses to fight instead of giving in and abandoning the market. This is the test case. Let’s hope one of the targeted firms decides to fight and has a good legal team to challenge these regulations on constitutional grounds. I sincerely doubt the constitutionality of these restrictions.
In a way this will also show whether any of these firms are worth trusting money with. If they’re reputable and care about their clients they should have the capacity to fight the lawsuit.
Who’s going to put a link to our thread on the Yahoo comments section?
This is a bully tactic. By announcing the lawsuit, they are making all the other brokers reconsider whether it is worth it at all to accept US citizens. So finding good brokers that will accept US traders has gotten even tougher.
I still maintain that that establishing an off shore trust is the sane and safe thing to do. Why just go off sure for your broker instead of going off shore for your legal status. I don’t see any down side to that other than the cost.
