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Permalink Reply by RONNY on March 11, 2011 at 0:33

Castellano and Associates

Mansfield Rd.

Shreveport,La.

 

 

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Permalink Reply by Robert Duke on March 11, 2011 at 5:04

They are not a software package, whereby someone with reasonable intelligence can do their taxes.  Also I am over 2000 miles away from any bricks and mortar outfits in the oil patch.

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Permalink Reply by Kathy Morgan on March 11, 2011 at 7:20

Sorry for the delay in answering.  I was doing double duty at my office yesterday and didn't get home until late.  In response to your concerns about the Sch E.  You have pretty much figured it out correctly.  You have to put the lease bonus (rents) on one Sch E with the associated expenses, if any.  Then you have to put the royalties on another Sch E with the taxes, production expenses, and depletion.  The program will combine these on to one Sch E with colum A and B filled in and net the amount at the bottom.

As to the depletion.  There is no "easy" way to do it in the depreciation/depletion screen of any of the software (even the one in our office).  Unless the land owner has a working interest in the royalties I usually put depletion on the other expenses line at a flat 15% of the gross income.  All works out the same in the wash and I've never had one come back on me that way.

 

For you LA and NC forms, the H&R Block At Home software will support it.  You need to file a non-resident LA return with just the Sch E items (and any other LA income) on it and then you need to file a resident NC return.  On the NC return there is a spot to take the credit for the tax liability (line 19) off of your LA return.  This will mean that even though you are reporting the income on two returns you are only being taxed one time.

Hope that helps.  Feel free to email me with any other questions.

 

Kathy

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Permalink Reply by Robert Duke on March 11, 2011 at 7:33

Hi Katy,

Thanks very much for taking a shot at this.  I remain amazed that it is as problematic as it is, but that is life, especially with taxes!  I can only imagine how swamped you all are until April 15th.  Okay, clarification question:  a "land owner who has working interest" is essentially an unleased mineral owner, is that correct?  Is that where all this confusion on depletion issues comes in?  I am a leased mineral owner, so while I have a "mineral interest", I presume my status is different due to the nature of losses I might incur (and expenses or other depreciation issues, ah joy oh joy).  TurboTax actually does seem to handle depletion okay (sticking it in a line on sched e that would seem to make sense, but maybe not due to the working interest stuff).  I was just amazed when H&R Block software basically had a box for depletion, but refused to go further if I attempted to claim it.  Anyway, I will try to do what you  have suggested.

Thanks again!

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Permalink Reply by Kathy Morgan on March 11, 2011 at 9:11

You are essentially correct.  There are other types of "working interests" but in most cases that is the way it works.  If you are in a lease you do not have a working interest and you just use the straight 15% depletion.  People with a working interest use cost depletion which is a very large pain in the hind end.  One of the reasons the software outside of the tax office doesn't support the situation is because there are so many varibles involved that the software isn't "human" enough to cover it. 

I don't see any reason from what you have said that you would not qualify for the 15% depletion.  It is so much easier to do and usually comes out better in the long run too.

 

Kathy

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Permalink Reply by ledlights on March 11, 2011 at 13:10

Kathy,

 

One tax mineral owners pay (at least in Texas) that is not included on the 1099s from the gas producers is county property taxes.  I have always included those as "tax expense" on my Sch. E's.  The statements I get from the county tax assessors identifies the tax for each producer associated property.  Is this a valid practice or should I take care of this differently?

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Permalink Reply by essay on March 11, 2011 at 9:47

so far i've tried taxslayer and turbotax, they've both given me the same result on my state return and within 10-15 bucks on the federal, i still haven't figured out where the difference comes from.  i used manual entry for both programs.

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