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Permalink Reply by Bill R on March 27, 2009 at 9:02

Same thing, I just got back from H&R Block and found that I owe a penalty on the bonus monies to the State of Oregon for not making quaterly payments. It is a small amount compared to what we received as bonuses, but still... a penalty?!??!? My Federal was fine, since I overpaid them early on this year by claiming zero deductions all year. Oregon law stated somewhere that we would have had to have made payment in all four quarters in anticipation of this bonus "windfall" to avoid the penalty, even if we received the majority of our monies for leases in late July through years end. My agent did say to have them list any future lease bonuses as royalties (as "fullofgas" stated on their reply) to avoid this in the future. Thanks to all of you that respond, at least I know that this effects more than just me.

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Permalink Reply by Linda Whatley on March 27, 2009 at 11:01

Same goes for State of Louisiana taxes. Our CPA had us pay estimated taxes to the State prior to year end, but he said we wouldn't have to make federal quarterly payments if we increased our payroll deductions during 2008, and paid at least 110% of what our tax obligation was the previous year...... So that's what we did. We'll have a hugh payment to make on April 15th, however, we did earn some interest in the meantime.

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Permalink Reply by nyghtbreeze58 on March 27, 2009 at 11:45

So just out of curiousity does anyone know what form the bonus and depletion is filed on?

H&R Block filed mine as rental property for the small bonus we received in 2007. I knew I was going to owe at the end of the year and paid some taxes the last quarter. I'll have to wait and see if the IRS charges me any penalty.

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Permalink Reply by Kathy Morgan on March 27, 2009 at 13:33

The rent form (Schedule E) is the correct form for this to be filed on.

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Permalink Reply by danny meyers on March 27, 2009 at 15:13

Thanks for posting.

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Permalink Reply by DaddyT on March 27, 2009 at 15:49

Kathy Morgan knows what she is talking about and is giving correct information. I agree with LJW, also.

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Permalink Reply by LYNN on March 28, 2009 at 5:33

She is right in what she is saying. If you don't believe her I suggest that you check with a lawyer also.

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Permalink Reply by SharonB T18N R15W S8 on March 28, 2009 at 3:05

I have a question even though I'm still unleased at this point. If you have the bonus reported as a advance of royalty payments, won't they then be able to deduct that amount from your actual royalty payments by saying you were paid that in advance. Hence, you would not have received a signing bonus at all, just an advance of royalty. Sounds to me like you are ripping yourself off to have it reported that way. I'd much rather pay quarterly taxes or a small fine than to have my bonus money deducted from my actual royalties.

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Permalink Reply by Kathy Morgan on March 28, 2009 at 3:28

Not sure how that works in the oil/gas industry, but I know that is exactly how it works with other types of royalities (i.e. book and music publishing). You migh want to pose that question in the "Royalty Payments Runaround" forum.

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Permalink Reply by VSC DeSoto South on March 28, 2009 at 4:06

I followed your advice in 2008 and made my quarterly payments in 2008 after I received my bonus in August.
Because of this the State of Oregon, Feds too, I think, sent me forms for quartely payments in 2009.
I am not sure what to do though, because I won't get another bonus, lease is 3 years, and I have no idea if they will actually drill and have sales of NG during 2009, so how do I know if I will have income, or how much, to base the quarterly payment on? WHat if I only get a royalty in Dec 2009? There is no way to anticipate this until you start receiving the payments, for that matter I coudl get 1 royalty payment and then they shut in for pipeline. Since in 2008 the 110% of income was based on my wages and rents from rental property, 110% was a small amount to satisfy the requirement. If in 2009 I have to base 110% on 2008 income 110% is now much more because of the bonus.

What does one do in this case about quarterly payments?

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Permalink Reply by Kathy Morgan on March 28, 2009 at 4:27

The 110%is of your 2008 liability like you said, the other option for estimated payments is 90% of your 2009 liability. If you are not receiving anything from the wells yet, don't worry about the estimated payments for right now. If you start getting money from them later in the year, use the coupons from that time frame on and send in only those quarters payments. Make sure your other withholding is high enough that it will cover your regular income. There are several calculators online (irs.gov, hrblock.com, etc) that can help you with that. Or sit down with your tax person and have them help you. The IRS and the state of Oregon know that one time windfalls happen. They just have it programmed automatically in their computers to send out estimated payments to anyone who made them the year before, that does not obilgate you to make them this year.

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Permalink Reply by VSC DeSoto South on March 28, 2009 at 7:43

Thanks Kathy

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