Which form should I use to file my taxes from trading?

Traders and investors have only a few IRS tax forms to deal with depending upon which instruments they traded. Choose the different trading instruments available below to learn more about the IRS tax form required for filing your gains and losses:

Stocks, Options, Single-Stock-Futures, Mutual Fund Trading

IRS form to file:  IRS SCHEDULE D (Form 1040) - Capital Gains and Losses

Most cash basis traders fall into this category and file their gains and losses on schedule d.  At first glance this form may seem quite simple to fill out, but nothing is as simple as it seems for the active trader. 

Please see our IRS Schedule D tax topic for details.

For those who have elected the Mark To Market accounting method with the IRS:

IRS form to file:  IRS FORM 4797 - Sales of Business Property

Please see How to report gains and losses marked to market for details.

Futures and Commodities Trading

IRS form to file:  IRS FORM 6781 - Gains and Losses from Section 1256 Contracts and Straddles

Form 6781 is used for all commodity futures, index futures, and broad-based index options contracts.

The form is broken down into two sections:

• Part I - Section 1256 Contracts Marked to Market
• Part II - Gains and Losses from Straddles

The advantage of these trading instruments is that they are taxed at a 60% long-term and 40% short-term.

There are no IRS requirements to itemize your futures trades to file your taxes.
Simply take the section 1256 net gain and loss figures from your broker provided 1099 and enter the total on: Part I - line 2 - Net gain (or loss) of Form 6781. 

This is the minimum amount of paperwork required by any of these instruments and makes filing your taxes on Futures trading much simpler than trading stocks and options.  No other reports or attachments are required.

Currency Futures Trading

Currency futures contracts are considered by the IRS as section 1256 contracts, and are treated the same as any other Future or Commodity contract.

FOREX Trading

FOREX (Foreign Exchange Market) trades are not reported to the IRS the same as stocks and options, or futures.  FOREX trades are considered by the IRS as simple interest and the gain or loss is reported as “other income” on Form 1040 (line 21).  No special schedules or matched trade lists are necessary. 

For a detailed discussion on filing your taxes for your FOREX trades see the GreenTraderTax Currency Education topic.