Schedule E - Royalties & Production taxes & other deduction fees on 1099-MISC

[Rita1954]

For oil and gas royalties (from 1099-MISC) where on Schedule E do you list Production Taxes paid and Other Deductions fees paid for well services?

Also, For oil & gas from 1099-NEC

[DianeW777]

It depends.  If you are provide services in connection with the production of the oil & gas wells, then all of the income is reported on Schedule C for self employment. The expenses would be listed under the category of Taxes and Other or Miscellaneous Expense.

If you are not providing services or working on the production of the oil & gas then the income and all the expenses would be entered on Schedule E with the expenses listed in the same categories.

[Rita1954]

DianeW777,

Thank you.

I also get 2 - 1099-NECs that list nonemployee compensation.  Up in the top right corner on one 1099-NEC, it lists "Other Deductions $___) & Net $ ___). On the Other 1099-NEC, it lists nonemployee compensation in Box 1 and on top right corner of page it lists "Other deductions $____, Production Taxes $_____, AR Netting $___ and Net $___.  My question is:  Does both these two -1099-NECs go on Schedule C and if so where do the "Other deductions, Productions Taxes, GO?  Do I do anything with AR Netting?  

On the two 1099-MISCs for Royalties, up in the top right corner on one it lists "Other Deductions $_____ & Net $____); on the other 1099-MISC for Royalties, up in the top right corner it list "Other Deductions $_____; Production Taxes, & Net $_____).  I know it goes on Schedule E, but I am not sure about the Other deductions or Production Taxes?  Also someone told me I could do depletion by taking 15% of owner gross value.  Would owner gross value be the amount of adding all four 1099s (NECs & MISCs) together to get the owner gross value and then take 15% of that amount for the depletion?  

Your help is much appreciated.

[Rita1954]

I also get 2 - 1099-NECs that list nonemployee compensation.  Up in the top right corner on one 1099-NEC, it lists "Other Deductions $___) & Net $ ___). On the Other 1099-NEC, it lists nonemployee compensation in Box 1 and on top right corner of page it lists "Other deductions $____, Production Taxes $_____, AR Netting $___ and Net $___.  My question is:  Does both these two -1099-NECs go on Schedule C and if so where do the "Other deductions, Productions Taxes, GO?  Do I do anything with AR Netting?  

On the two 1099-MISCs for Royalties, up in the top right corner on one it lists "Other Deductions $_____ & Net $____); on the other 1099-MISC for Royalties, up in the top right corner it list "Other Deductions $_____; Production Taxes, & Net $_____).  I know it goes on Schedule E, but I am not sure about the Other deductions or Production Taxes?  Also someone told me I could do depletion by taking 15% of owner gross value.  Would owner gross value be the amount of adding all four 1099s (NECs & MISCs) together to get the owner gross value and then take 15% of that amount for the depletion?  

Your help is much appreciated.

[DianeW777]

The Form 1099-NEC indicates a working interest in the activity.  You will have to figure out if the amount in Box 1 is net the expenses.  If so, then there is nothing to deduct from the expense notations.  If they actually reported the gross amount to you, then the expenses can be used on Schedule C.  You can add them together and put them in as one entry.

The Form 1099-MISC is royalties.  You can use the 15% depletion allowance which is an easier expense to use and it doesn't require and documentation.  Likewise I would add them together in one entry.  It's the same scenario here, if you know they reported the gross royalty without taking any deductions you may be able to use the actual expenses.  I would check with the company to see how they reported these payments to you.

[wolverine71]

May I go back to claim expenses from prior years on royalty income?  How far back?

[DianeW777]

It depends. A Form 1099-NEC indicates you are involved in the production of the oil & gas well.  This income must be reported on Schedule C as business income as opposed to royalty income. Expenses are allowed on the Schedule C to reduce the income.

For royalties that are not part of the production income, this is reported on Schedule E and the percentage or cost depletion is allowed as an expense. Most people use the percentage depletion of 15% for oil and gas wells.

If any expenses were not deducted in a prior year you can amend your prior year returns to include them.  Likewise, if the income was not reported correctly, you can adjust that as well.

To amend your tax return use the link below and be sure to read all the information before you begin so that TurboTax knows the original figures and the changed figures: 

• How to amend (change or correct) a return already filed?

When you are ready enter the Form SSA-1099 by taking the steps below.

• Search (upper right) > royalties or schedule c > Click the Jump to... Link > begin the entry of expenses or income

@wolverine71

[wolverine71]

I have used TT for 10 yrs. and yearly reported royalty income on Sch. E, but I did not deduct all expenses.  How far back can I go (how many years) to claim NEXT year as a deduction carry forward?  Thanks.

[DianeW777]

The amendment for 2018 is due today (expires tomorrow) to receive any refund.  You have some time for 2019 (expires next April 15th) and 2020, but that's as far as you are allowed to go back and expect a refund.

The IRS will not release any refund after the statute of limitations expires.  

• Generally, the statute of limitations for the IRS to assess taxes on a taxpayer expires three (3) years from the due date of the return or the date on which it was filed, whichever is later. A return is considered to be filed on the due date of the return if it was filed on or before its due date.
  • IRSTop 305 - Recordkeeping

[Fig18]

Hi,

On my 1099-misc I have "Other Deductions" of 21.81 and "Taxes" of $2.38. I know I can take the 15% depletion (and input it on Schedule E); however, where would I input the "Other Deductions"? 

Thank you in advance.

[PattiF]

You can enter the Production Taxes and Other Revenue Deductions as an expense against the royalties.  To do this please follow these steps:

1. Click on Federal  > Wages & Income  [In TT Self-Employed:  Personal > Personal Income].
2. Scroll down to the Rental Properties and Royalties section and click on the Start/Revisit box.  
3. On the Income from Rentals or Royalty Property You Own screen click Yes.
4. If you have already started adding information about your royalty, you will come to the Rental and Royalty Summary screen.  Click the Edit box next to the royalty.  Or you can click on the link Add Another Rental or Royalty.   
5. On the screen, Is This a Rental Property or Royalty?  be sure to mark the radio button next to Royalty property or payment. 
6. Continue through the screens, entering the requested information, until you reach Review Your Royalty Summary.  
7. On this screen, click the Start/Update box next to Expenses.  Continue to the Any Miscellaneous Expenses screen and enter the amount.

@Fig18