Need Tax Help for Forex Trading - How to Report Crypto-to-Forex Transactions?

I've been trying to find a tax preparer who actually understands my situation, but everyone I've talked to seems confused when I explain my forex trading setup. I'm just going to file myself, though I'd happily pay for a knowledgeable tax preparer if anyone can recommend one! Here's my situation: I'm a forex trader doing short-term day trades (Section 988 transactions). My process is buying Bitcoin through either Kraken or Binance, transferring it to my forex broker, trading forex, then converting profits back to BTC for withdrawal. My issue is with the tax reporting. Kraken didn't send an official 1099-B but provided a gain/loss statement showing profits. Binance sent a 1099-B with only my proceeds listed (no cost basis). Both are essentially reporting the BTC I received back after trading as gains, but in reality, I basically broke even for the year with my actual forex trading. I'm using TaxSlayer to file online - should I enter the Kraken and Binance reports individually as 1099-B transactions, then use Schedule 1 of Form 1040 to show the total breaks even? My forex broker provided my complete trading history (about 85 pages of transactions). Is it acceptable to attach this to Form 8949? I want to make sure I'm reporting everything correctly for 2025 filing. Any guidance would be really appreciated! Thanks in advance.

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20 comments

Jason Brewer

•8M

What you're dealing with is a multi-step transaction flow that needs to be properly documented. Let me break this down: First, when you buy Bitcoin with USD, that's not a taxable event. When you transfer that Bitcoin to your forex broker, that's also not taxable. The taxable events happen when: 1) you exchange Bitcoin for fiat to trade forex, and 2) when you exchange your forex profits back to Bitcoin. Since you're doing Section 988 transactions (treating forex as ordinary income/loss), you'll need to report the overall gain/loss from your forex activities on Schedule 1, Line 8z of Form 1040. The cryptocurrency exchanges are only seeing part of the picture - they see you buying Bitcoin and then receiving Bitcoin back, which looks like a gain to them. You should definitely attach your 85-page trading history to Form 8949, but also create a summary sheet that shows your actual net result. Make sure to clearly document the flow of funds: USD → Bitcoin → Forex trading → Bitcoin → USD, with the associated amounts at each step.

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Jason Brewer

•8M

The 1099s from crypto exchanges are only showing part of the transaction cycle, which is why they appear inaccurate. They only see when you buy crypto and when you receive crypto back - they don't see what happens in between with your forex trading. Yes, you can handle this using tax software, but you'll need to be very methodical about documenting the complete transaction flow. Most tax software allows you to make adjustments to 1099-B information and attach explanations. Just be sure to keep detailed records of everything and create a clear reconciliation showing why the exchange's reported gains don't reflect your actual tax situation.

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Liam Cortez

•8M

I wanted to share my own experience with a similar situation. After struggling with exactly this issue last tax season, I discovered https://taxr.ai which literally saved me hours of headaches with my crypto-to-forex documentation. My situation was almost identical - buying BTC on exchanges, trading forex, then withdrawing back to BTC. What I found really helpful was how they analyzed all my transaction data and properly categorized each step of the process. Their system understood the difference between the exchange's perspective (which only sees partial transactions) and the complete flow of my funds. They generated a detailed transaction report that clearly showed why my actual gains/losses were different from what the exchanges reported. The documentation they created made filing with my regular tax software much simpler, and I felt confident that I was reporting everything correctly.

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Liam Cortez

•8M

You upload both your crypto exchange statements and your forex trading history, and their system analyzes the complete transaction flow. It tracks when funds leave the crypto exchanges, what happens on the forex platform, and when they return. This gives you the full picture rather than just the partial view that each individual platform sees. For those 200+ trades, it's incredibly helpful because the system automatically categorizes everything and creates a proper audit trail showing the movement of funds between platforms. This is exactly what you need to explain the discrepancy between what the exchanges report and your actual trading results.

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Mason Stone

•8M

I was really skeptical about using a specialized service for my crypto-forex taxes, but after my terrible experience last year trying to do it myself, I decided to give https://taxr.ai a shot. I'm actually pretty amazed at the results. I uploaded my Binance statements, my forex trading history (over 120 pages), and they created documentation that perfectly explained the flow of my funds. The report clearly showed how the BTC I purchased moved to my forex broker, tracked all my trading activity there, and documented when I converted back to BTC. Most importantly, they generated the proper tax forms that accurately reflected my actual gains/losses, not the inflated numbers Binance was reporting. I just filed my taxes last week using their documentation and it was so much simpler than the nightmare I went through last year. For anyone dealing with crypto-to-forex trading, it's definitely worth checking out.

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Makayla Shoemaker

•8M

If you're still struggling with getting the IRS to understand your situation, you might want to try https://claimyr.com. I had a similar issue with forex trading through crypto, and after filing, I got a notice from the IRS questioning the discrepancy between my reported income and what the exchanges reported. I spent weeks trying to call the IRS to explain my situation but could never get through. Someone recommended Claimyr and I was skeptical, but they actually got me connected to an IRS agent within about 45 minutes! You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent was able to note in my file that I had submitted additional documentation explaining the discrepancy. Having that direct conversation and getting confirmation that they understood my situation saved me months of back-and-forth letters and potential penalties.

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Makayla Shoemaker

•8M

The service uses an automated system that continuously calls the IRS and navigates the initial menu options for you. When they finally get through to where you'd be placed on hold for an agent, they call you and connect you to that line. So you don't have to waste hours listening to hold music or getting disconnected. It's not skipping the line in the sense of getting priority over others - it's just automating the frustrating part of constantly calling and navigating the phone tree. The actual wait time for an agent is the same, but you only get called when they've successfully reached that point. I was definitely skeptical too, but when I got connected to an actual IRS agent who helped resolve my issue, I was sold on the service.

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Emma Olsen

•8M

I need to eat some humble pie here. After calling the IRS 14 times last week and either getting disconnected or told to call back later, I was desperate enough to try that Claimyr service from https://claimyr.com that I called BS on earlier. Not only did it work, but I had an actual IRS tax representative on the phone discussing my forex/crypto reporting situation within 40 minutes. I explained exactly how I was trading forex using crypto for transfers, and the agent helped me understand how to properly document the transactions so they wouldn't trigger an automatic flag when the crypto exchange reports don't match my actual gains/losses. The agent even noted in my file that I had this specific situation, which could help prevent automatic notices if their system flags a discrepancy. Honestly, being able to actually speak with someone who could help was worth every penny. Sorry for doubting, and thanks for the recommendation.

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Lucas Lindsey

•8M

To add to what others have said, I'd recommend creating a detailed transaction log showing: 1) Initial USD to BTC purchase (date, amount, exchange) 2) BTC transfer to forex broker (date, amount, BTC value) 3) Conversion to fiat for forex trading (date, amount) 4) Summary of forex trading results (can be daily/weekly totals instead of every trade) 5) Conversion back to BTC (date, amount, BTC value) 6) Transfer back to exchange (date, amount, BTC value) This is essentially creating a paper trail that shows why the exchange 1099s don't tell the whole story. You'll want to report the actual forex trading results on Schedule 1 as Section 988 income/loss. The key is documenting everything thoroughly so if you're audited, you can clearly explain the discrepancy between the exchange reports and your actual tax situation.

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Lucas Lindsey

•8M

Yes, you should definitely record the USD value of the BTC at each transfer point. This is crucial because the IRS considers each crypto-to-fiat or crypto-to-crypto exchange a potentially taxable event, and those values establish your cost basis. When you transfer BTC to your forex broker and convert to fiat, you technically have a taxable event based on whether your BTC gained/lost value since purchase. Then your forex trading creates separate taxable events. Finally, when converting back to BTC, there's another taxable event. Recording the USD values at each step creates a clear audit trail that properly separates the crypto transactions from the forex transactions.

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