Hey all,
I currently have a CPA, she is good but as far as I know doesn’t have any actual experience with Mineral Royalties and payments, but had suggestions when I asked her a few questions about it. I am Curious if I need to look for anything specific in a CPA when it comes to mineral royalties and payments? My minerals are in Montana and I am in California, so not sure how that affects everything.
I have received my Lease bonus for 2024, and it sounds like our area will be drilling in the next month give or take so I am hopeful royalties will come shortly after that, and will need help navigating it. Any help or suggestions would be greatly appreciated! Thank you!
Unless you have some complex issue, your CPA should be able to easily apply the IRS rules for your Schedule E or C. Many people refer to a bookeeper/accountant as a CPA; however, there is a world of difference.
So on the tax side of things the CPA doesnt really need to know anything about mineral rights and how they work? Still new to this so not sure if there were certain deductions one could do with these that someone who isnt versed into the mineral rights world would know or not.
I would ensure they understand how the depletion calculation works.
They do not need to understand the transactional side of minerals, just the accounting which is not that difficult. In some cases there is a confusion of cost versus percentage depletion, but this can be resolved with some minor research and cost analysis. If percentage depletion is used, then accounting/reporting is simplified. The choices of Schedule E versus Schedule C can be more complex dependent on tax status. Many make mistakes of trying to use the CPA as a transactional advisor. This is generally going to be a mistake.
@TayNeatCPA if you need to explain to a CPA how cost or percentage depletion operates, then you most likely have the wrong person. 30 minutes of research can develop a sufficient knowledge base.
I know it is simple. Especially when only dealing with unencumbered mineral interests. I’ll tell ya what though, you’d be surprised how many tax preparers screw it up!
A tax preparer is not required to be a CPA. If they have a problem understanding depletion, keep looking.