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New Member
posted Jun 3, 2019 11:52:45 AM

My 1099misc shows 7513 in box 2 for royalties but below it states of information only box 2 royalty less deducts 5050.90 which is reportable income?

the 1099 misc provides no details of the difference of the two figures.

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1 Replies
New Member
Jun 3, 2019 11:52:47 AM

If this is oil and gas royalties, there are two different ways that royalties can be reported in box 2. 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. I cant tell from your question, which way the payer has reported. However, you can clarify this with the payer. 

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 Investopedia website for additional information about production taxes, cost depletion, and percentage depletion. http://www.investopedia.com/terms/p/percentage-depletion.asp