1099-Misc On Oil & Gas Royalties

[mikeburg]

I have a Taxpayer who got a 1099-MISC with $52,000 in box 7 Nonemployee compensation for oil & gas royalties. It didn't say working interest anywhere.

If it is for working interest, is working interest subject to SE tax?

If not, how can we show this where the IRS computers will match?

The taxpayer is age 64 & drawing Social Security early, should Social Security be Deducting for work?
(They did for tax year 2014)

I would appreciate any information you can help me with.
Thanks so much! mikeburg

[TAXNJ]

A start

A possible start for one of your comments since you know more about your client's activity.

https://www.irs.gov/uac/Newsroom/Tips-on-Reporting-Natural-Resource-Income

Confused about your comment on Social Security when client works. Someone may understand better what you are saying.

[Jiggers]

I have a Taxpayer who got a 1099-MISC with $52,000 in box 7 Nonemployee compensation for oil & gas royalties. It didn't say working interest anywhere.

If it is for working interest, is working interest subject to SE tax?

If not, how can we show this where the IRS computers will match?

The taxpayer is age 64 & drawing Social Security early, should Social Security be Deducting for work?
(They did for tax year 2014)

I would appreciate any information you can help me with.
Thanks so much! mikeburg

I think you need to ask your client what this was for.

[spanel]

if its for Royalties.. your client needs to get a corrected 1099.

if he bought into the well.. they he's a partner of sorts and it goes on a Sch C.


Chris

[TXEA]

If it is exactly $52,000, then it is most likely a lease bonus reported on the Form 1099 incorrectly. Call your client and ask for the paperwork related to the 1099.

[mikeburg]

More clearfication.

The taxpayer gets a monthly check for the last 2 1/2 years. It averages about $52,000 the last two years.

The taxpayer is 63 & looses $1 for every $2 of earned income.

The social security administration is picking up on the schedule C or SE on this income.

Since the taxpayer does not perform a service for this income, is there a way to keep the SS Administration from taking away part of his social security since he is not 65 yet?

Sorry for the initial confusion. The taxpayer is not much help on this.

Thank so very much for any more ideas with this addl info. mikeburg

[spanel]

The taxpayer gets a monthly check for the last 2 1/2 years. It averages about $52,000 the last two years.

The taxpayer is 63 & looses $1 for every $2 of earned income.

The social security administration is picking up on the schedule C or SE on this income.

Since the taxpayer does not perform a service for this income, is there a way to keep the SS Administration from taking away part of his social security since he is not 65 yet?

Sorry for the initial confusion. The taxpayer is not much help on this.

Thank so very much for any more ideas with this addl info. mikeburg

Most likely not. I doubt it makes any difference if its royalty income or SE income.

Chris

[Jiggers]

There is a difference in reporting royalty versus SE income when you are under the full retirement age. It could affect your benefits.

In either case, it could make your SS benefits taxable.

Your client is not giving you all the information. He has to have more knowledge than he is revealing. Otherwise you have to report it as you see it.

If it is a working interest, he does get a 15% depletion.

[FEDUKE404]

Likely Sch C income

Viewed from afar, a Form 1099-MISC with an entry in Box 7 smells seriously like something resembling self-employment income / Sch SE / etc.

If the guy is collecting Soc Sec benefits prior to full retirement age, there is a good chance he will "loose" some of those due to the earned income limits.

But you probably need some more facts to reach a firm conclusion. That would include the accuracy of the information shown on the Form 1099-MISC.

FE

[mikeburg]

Will do, thank you for all your suggestions.

Thanks so much everyone. mikeburg