How to properly handle oil and gas royalties

[dwright2020]

I mistakenly assigned my (first ever) oil and gas royalty to the rental property sitting on the land, and eventually got an error message that I needed a separate Schedule E for the royalty. I did that, but TT still thinks that my rental is a royalty. The type shown on the worksheet  for the rental property is '2' (duplex), but TT insists it is a royalty. How do I fix this?

[Carl]

Simplest way is to delete "EVERYTHING" in the SCH E section and re-enter it anew, correctly the 2nd time since you are now aware of what your error was the first time.

Assuming you have an entry for the rental and another for the royalty, as you start working through the SCH E section you'll get to a screen that list them. Click the DELETE button next to each (or just next to the one causing the issues) and delete it. Then continue working through the SCH E section until you get to a screen with a DONE button on it, and click that DONE button. Changes do not stick until you actually click the DONE button.

Then you can re-enter the data again by entering the SCH E section again and when you get to the screen with "Add Another Rental or Royalty" on it, click that button and press on to re-enter the data.

[dwright2020]

Maybe I am misunderstanding you. I deleted the rental, now all my historical data on that property is gone. That can't be right.

[dwright2020]

So I discard that version, get the file again, dellete the royalty property, and then try to update the rental property, In the first screen, I change it to rental and continue. After a couple of screens, it asks me what type of royalty is this. ?? I say 'none of the above and continue. Next page says 'where do you want to import your royalty income  from?" Aarg!

[Carl]

Darn!  I totally forgot about that. THere's two ways to get the historical data base, which you absolutely need.

1) Start your return over from scratch, so that you can import it again from the .tax2019 tax file is one way.

2) The other way is to print out the two IRS Form 4562's from the 2019 return (they both print in landscape format) and use that data to manually re-enter the historical data.

Option 2) really isn't as much work as you may think. When you re-enter the property and their assets in the Assets/Depreciation section using the original cost and in service dates, the program will "assume" the prior year depreciation already taken, and figure the 2020 depreciation accordingly. The primary reason for printing out the 4562's from the 2019 tax return, is just to confirm the program's "assumptions" are correct. Sometimes they may be off by a few bucks, and if so that's really not a big deal.

You'll also want to print out the IRS Form 8582 from the 2019 taxes so you can get your carry over losses from 2019 and prior, if/when the program asks you for those. With the new rules (relatively new, anyway) allowing you to deduct up to $25K of passive losses from "other" ordinary income if you qualify, it's perfectly possible you won't have any carry over losses. But it doesn't hurt to check the 8582 from 2019 to make sure.

[Carl]

In the first screen, I change it to rental and continue.

A bit unclear there. With the desktop version, you don't change it to rental. The default selection is already rental. If you change it to anything, you would change it to royalty.

 It's apparently to me now that we're not on the same page, and because I forgot about the history aspects of rental property that were lost when you deleted it the first time, I fear we may waste quite a bit of time trying to "recover". This is why it might be best to start over from scratch.

Simply delete or rename the .tax2019 file in the documents/turbotax directory (rename it with a different filename extension) and upon restarting the program it's just like you fired it up for the first time after installing it.

[dwright2020]

I'm going to try option 1. It seems like a lot of work, but TT hides some info from me and I can't help thinking that when I type in values that I saved before deleting, somethinmg will be missing.

If I enter the 1099-MISC and then select a 'new property' to assign it to, will that work?