Oil & Gas royalty payments, gross or net amount entered

[coronjar]

Apparently, this is a common question.  I, too, have a 1099-Misc. from WPX Energy.  It lists a Gross Amount and a net amount, with over $700 having been deducted from my Gross amount.  I don't see any place to enter the "Revenue Deductions" from the Gross amount, but it doesn't say what the deductions are for, and I did NOT receive the Gross amount in payments, I received the Net amount during 2015.  Which is the correct amount to enter?

[MargaretL · Accepted solution]

You should report the gross amount, then deduct the expenses against it to arrive at your net.  IRS does match the 1099Misc forms against their database and will be looking for the gross amount reported.

When you enter form 1099-Misc, you will be asked if the amount came as oil & gas royalty income.  Please continue through the interview, you will arrive at the screen calculating your depletion amount.  You will have an option on that screen (see attached picture) to select More Expenses.  Please select this option and continue through the interview one more time.  On your royalty's summary screen, select Expenses and you will be able to enter your own description of the expenses and the amount.

[NCS]

Net amount shown on 1099s do NOT match the income I actually received.   As a percent of gross, the amount I actually received is 15% to 16% less than the gross.  I've queried the company, but have not yet received answer.  From my perspective, if a deduction from the gross is not shown on the 1099, I've been underpaid. 

[Carl]

From my perspective,

Perspective doesn't count. Only results matter.  While it is possible the 1099-MISC is wrong, I doubt it.

In the box for "Royalty Income from checks, cash or 1099-MISC" the amount you enter there *must* include the amount reported in box 2 of the 1099-MISC. *period*.

In the box for "Taxes Paid" total up the amounts in boxes 4, 16 and 17. Add that total to any other taxes you paid on the amount of this royalty income, to any other taxing authority and enter the amount.

Then on the next screen will be the depletion already entered and figured for you. On that same screen is a button for "more expenses". Click it and enter any other expenses associated with this royalty income. Work it through to get to the Royalty Summary screen. From there you can enter more expenses. It's perfectly possible that the royalty payer may have paid some expenses "on your behalf" and you would be able to deduct those expenses from the royalty income on your tax return. I detailed report from the payer should clear it up.

[Olsa]

Thank you for the explanation. I now understand what the program is doing with the options presented on costs or depletion allowance.