There are two different ways that royalties can be reported in box
2 of Form 1099.
Some payers report the gross amount of royalties in box 2; which means that
the amount of the tax is included in box 2.
Some payers report the net amount
of royalties, which means they have subtracted out the production taxes.
You would report the gross amount of
royalty income on Schedule E. Then you can take a deduction for the production
taxes that you paid. Please refer to page 6 of the IRS instructions under the
heading, "line 4" for additional clarification. https://www.irs.gov/pub/irs-pdf/i1040se.pdf
According to page 16 of Pub 525 under
the heading, "Royalties", "in most cases you report royalties on
Schedule E (Form 1040). However if you hold an operating oil, gas, or mineral
interest....report your income and expenses on schedule C (Form 1040)".
https://www.irs.gov/pub/irs-pdf/p525.pdf
Please refer to the following FAQ for instructions on how to enter this information in to Turbo Tax. https://ttlc.intuit.com/replies/4792182
