Tax Planning/tax


QUESTION: In the year 2012 I lost $4,000 in FX trading using my home computer as a side "hobby". How do I account for that during tax time? What line, how does it affect my taxes, and is the whole amount a deduction from my regular income as an employee?

ANSWER: Al - Your question is a little confusing.  I understand the part about losing $4,000.  This would not be considered a "hobby."  It COULD be considered your occupation if it were done as a business (that is, trading).  

Most likely, though, it is simply a capital loss.  The loss was either long term or short term.  It was either reported with basis to IRS or it was not.  You need to complete form 8949 and transfer the totals to Schedule D.  Generally, you will be limited to $3,000 in losses this year and the balance will carry over to next year.

I would suggest meeting with a qualified tax professional in your area to make sure it is handled properly.  It can be somewhat complex to report it right on those tax forms and schedule.

I hope this helps.

---------- FOLLOW-UP ----------

QUESTION: Under "description of property" of 8949 what do you recommend I do because I have over a 100 transactions. Also the net amount goes on line 13 of 1040 right?

You can summarize, but you will have to make a copy of all the transactions that you received from the broker (on the 1099-B) and send it to the IRS with Form 8453.

And, yes, the net amount on SCHEDULE D goes to line 13.  You first have to transfer the amounts from the 8949 to Schedule D.

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As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.


I have a 25 year background in financial services including tax, bookkeeping, insurance, real estate and securities. I was previously the Chief Financial Officer of a local and national franchise organization. I am currently semi-retired, but used to own (in partnership with another EA) an individual and small business financial engineering firm where I work with nearly 2,500 individuals and small business owners in nearly every state and almost every continent, assisting them in all aspects of their tax and financial well-being. I have prepared or reviewed more than 8,000 tax returns in my career.

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Enrolled Agent, Admitted to Practice Before the IRS, Accredited Tax Preparer, Fellow of National Tax Practice Institute, Certified QuickBooks ProAdvisor (1999-2011), Sleeter Group Certified QuickBooks Consultant, Life & Disability Insurance Agent License (California, Texas, Maine), Real Estate Agent License (California); Many years of continuing education in all these fields.

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