It depends. The 1099-MISC income is entered on either Forms Schedule E, F,C, or as Other Income. You may contact the payer if the income was a lease payment (rent) or minerals (royalties). If it's a lease, it's entered on Box 1 as rent income, and box 2 for royalties. You may follow the steps below to enter the income:
I know I am entering this on the 1099 Misc Form but is this non business or business income?
is this non business or business income?
Neither. It's passive income. For rental income and royalty income, it gets reported on SCH E as a part of your personal 1040 tax return. You start in the Rental & Royalty Income (SCH E) section of the program. With the online version of Deluxe, that's under the Personal Income tab.
When I try to enter rent from misc 1099 the Turbo Tax does not like it because its a rent not a royalty. Try to put it in as rent and it thinks its a rental property. It doesn't seem to allow for a signing bonus or rent from mineral rights contract signing rent only.
Lease bonus payments are considered rental income. See IRS Tips on Reporting Natural Resource Income .
It says what type of rental is this do I answer other and put "Lease Bonus" as Describe other type?
What about the blanks for description city state and zip? It doesn't like those blank. Do I calculate days entered by looking at the contract? You would think the program would make it as easy to use as if it was a royalty from the mineral lease.
Yes, 'lease bonus' is the description.
City state and zip should be of the actual property that is being leased.
It doesn't have an address, I guess a parcel number for address then count for city I get off of the contract. Zip code is going to be a toughly. I didn't know I even owned it until the "Land Man" came looking for the kin of my Great Great Grandfather to sign contracts to drill it.
I guess the days rented is days remaining in year from the day I signed the contract. I acquired it the day my dad died? Neither my dad or his mother even knew they owned it.
A parcel number would be good for the address. Use the information that you can find for the address.
Yes, you can count the days from the contracting signing to enter into the form.
That's quite a story! Pleasant surprise from your Great Great Grandfather. Sorry for the loss of your dad.
My dad passed away 15 years ago and just found out about this earlier this year. I was thinking they wanted the date I acquired it so that would the day he passed away I guess even though I had no clue.
Yes, that would be the date to use for when you acquired this asset that you didn't know of before. This was a Long term forgotten family asset!
What about fair market value including land and available date? at this point I feel like I would be just making things up is this right. Then Land Value do I just leave all this blank?
Fair market value is whatever is on the tax rolls since you haven't had it appraised. Land value is the actual value from 15 years ago but I would just enter the same number as fair market value for now.
Fair market value is whatever is on the tax rolls since you haven't had it appraised.
That needs clarification. There is a vast difference between tax value and fair market value. While all tax rolls will show the tax value, they don't all show the fair market value. Typically based on what I've seen, the tax value is about 30% lower than the fair market value.
In my county, they just recently started showing FMV on the tax bills a few years after the crash of 2008/9. Before, all you got/saw was the assessed tax value.
Now-a-days when converting a property from personal use to rental use, it is not that common for the value on the date of conversion to be lower than the original acquisition price/value. However, depending on the locale it's perfectly possible for the assessed tax value to be lower. That's why the IRS does not condone the use of tax values for depreciation. (I've not seen anything that forbids it. Best I've seen is where it gives me the impression it can be used only when all other methods of determining FMV have been exhausted.)
Now I am concerned about all the advice so far. There is no land it is simply the mineral rights.
If there was land I would have done all this stuff without confusion but now I am not sure what info is correct.
Do I do this for something that is simply mineral rights and not the surface rights. The land is not in my name it is owned by someone else I just have the rights to the gas and oil in the ground
If it is mineral rights, and there is no land, this will be reported in the Wages and Income section, from the left menu.
Its not a Royalty its a Rent and reported in box 1 of the 1099-MISC.
I have found this on the internet. This is a Lease Bonus as I said earlier.
"Lease Bonuses – Normally paid at the time of signing or over the life of the lease, lease bonuses constitute additional income to incentivize the lessor to sign the agreement. This income is treated as rental income and should also be reported on the taxpayer’s Schedule E, line 1."
Is there any professionals that can give me a clear path. The farther I listen the less confidence I have on the guidance I am recieving
The material you reference would indicate the income is rental income and it is reported as such on the Form 1099-MISC you received. When you enter it in TurboTax it will be treated as rental income. From a tax standpoint, I don't know of any significant consequence to reporting it as royalty income versus rental income, either way it will be reported on page one of schedule E and get the same or similar tax treatment. So, it seems to be accpetable to treat it as rental income. @The Big Daddy
Turbo Tax doesn't like it entered as a royalty because on the 1099-misc the rent is in box 1.
When I try to enter the property as a rental Turbo Tax acts as though there is physical property and everything I enter is actually the details of land owned by someone else.
Maybe the farm thing is the way to go. That came from a different Turbo Tax "Expert" as well.
It sure would be nice to have all "experts" with an absolute answer.
Well is the Farm idea the best? Which one is the best idea and probably right?
I don't know of any significant consequence to reporting it as royalty income versus rental income,
The difference is depreciation vs depletion. So it matters.
Well that's still not an answer. Turbo Tax falls short on this one. It also says no to reporting it as a royalty before it doesn't tell me what to do with it.
Oil & Gas Royalty Lease $ - reported as Rental Income; coded as "6" Royalty and properly entered in Turbo Tax produces the error message on Line 3 of Schedule E:
"Income from rental real estate {This is NOT rental real estate it is rental lease on Oil and Gas Royalties} and income from royalties must be reported as separate properties on Schedule E."
I have used Turbo Tax for many, many years and I have always reported it this way. It has never before been an issue. It is property Linked to the appropriate Oil and Gas property. Does your program no longer support income from Oil and Gas Leases? Do you have a fix in place now or soon? Thank you.
Yes, if I understand what you are trying to convey, You have royalties from a oil & gas property and income from a lease for the oil & gas property. Enter them individually even if you have only one 1099-MISC for both. Both would be reported on Schedule E but in two different columns like they are two separate properties, even if they are the same property.
You can enter royalties (or rent/lease payments) directly in that section or you can enter it through the 1099-MISC. Royalties are still reported basically the same way in TurboTax even though it may look slightly different.
With your return open, search for1099misc (or royalties for direct entry) and select the Jump to link in the search results.
When you enter your 1099-MISC, enter the income in Box 2 - Royalties. On the following screen, choose the source of your royalty income:
Once you've selected the proper classification, follow the onscreen instructions.