Oklahoma Taxes on non oklahoma oil and gas income

[wgee]

I live in Oklahoma. I have working interest from my business in Texas. Is that income taxable in Oklahoma? The law clearly reads I do not.

[DavidD66]

No, it is not taxable by Oklahoma.  It would be included in your federal income, which is the starting point for your Oklahoma tax return.  Some Out-of-State income is then subtracted on line 4 of Form 511.  Below is the description of out-of state income that is not taxed, according to the Oklahoma Tax Commission instructions for Form 511:

This is income from real or tangible personal property or business income in another state. This includes partnership gains and gains sustained by S corporations attributable to other states. It is not non-business interest or dividends, installment sale interest, salary/wages, pensions, unemployment compensation, gambling or income from personal services. (See instructions for line 16.) Provide a brief description of the type of out-of-state income deducted. Provide detailed schedule showing the type, nature and source of the income and copy of federal return. Documents submitted should reflect to which state(s) the income is attributable. Provide the other state’s return and/or Schedule K-1, if applicable.

[wgee]

Thank you for your reply. Since I also receive ORR income (1099 Misc) which easily fits line 4 as it comes on schedule E (fed) I found no area to put 1099 NEC income since it goes to my C. I can combine the WI and ORR onto line 511-4 and see what happens. There should be more direction by the state on this.

[DavidD66]

Your 1099-NEC reported on Schedule C of your federal return is not something that you would include (subtract) on line 4 of your Oklahoma return.  It would be income from personal services which is not exempt.  I'm not sure what you mean by WI and ORR income, so I can't comment on that.  If you would like to clarify by providing additional information I can respond to that.  

[wgee]

The Texas operator of the property reports working interest income on a 1099 NEC. That money is the oil and gas income from production for which I have participation in said wells. It is not personal services. I also have a royalty interest in the lease which is reported on a 1099 Misc. Both of these are out of state income from a property I have owned since 1995. I can assign the 1099Misc to the Sch. E but the 1099NEC only selects the schedule E for assignment.

On schedule C, after all overhead costs are offset from income, I have a net number which I can add to the net ORR income from E to place in line 4 of 511. Hope this makes sense. Thanks again for your reply.

Should I create another record in E which I can assign the W. I. too and the related expenses?

[wgee]

"..... but the 1099NEC only selects the schedule C for assignment."

A CORRECTION IN MY TYPING.

[PatriciaV]

To report the income from Form 1099-NEC on Schedule E, you may enter this information under the Royalty Income topic and not under the section for 1099-NEC.

First, go to the 1099-NEC topic and delete (trashcan icon) the 1099-NEC that you have entered.

Now, go to your Royalty Properties for Schedule E and create (or edit) your working interest property. Enter the income from 1099-NEC for this property as "Other income." Note Schedule Line 3 has a box for "income not reported elsewhere." The IRS is more concerned that you report all income than with how that income is entered.

[wgee]

Thank you PatriciaV for the insightful answer. This squares with the law as stated and sets me up for a few Amended tax returns.

Wgee