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are currency conversion losses a business expense?

Forum|Forum|5 years ago
July 29, 2020
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If you earn foreign currency and use the exchange rate at the time of receiving the foreign payment but convert it to u.s. dollars at a later time and exchange rate decreases causing a loss can this loss be claimed as a business expense?

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Best answer by Anonymous_

You have to report the amounts on your U.S. tax return in U.S. dollars and you would use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item.

See https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

Carl11_2

That's not a loss by any stretch of the imagination. You just report less income in U.S. dollars is all.

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dea484Author

Thank you for your help, unfortunately I believe I would be getting a 1099k based on the exchange rate at the time of receiving the foreign currency. Would it be better to claim conversion losses as a business expense to not cause a discrepancy for 1099k reported amount or would reporting less income be okay in this circumstance.

Carl11_2

I believe I would be getting a 1099k based on the exchange rate at the time of receiving the foreign currency.

Then you have no loss to claim - but you do have income to report, which will be the U.S. dollar amount reported on the 1099-K.

Even if the rate was better for you at the time of billing, it doesn't matter. You flat out can not deduct from your taxable income, that which you never received or paid taxes on in the first place. You claim as income the *exact* amount reported on the 1099-K. No more. No less. No exceptions.

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Anonymous_Answer

You have to report the amounts on your U.S. tax return in U.S. dollars and you would use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item.

See https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates