This question is just for the future and I hope the near future. But when royalties are received do you have to set up to pay quarterly taxes. Can you just included the monies with your regular income tax . And I read some where we will also have to pay property taxes on royalties received from the county where the minerals not the county where we live. If you live out of state what/how are the taxes calculated paid. Not looking for specific information just some general information if possible.
You will have to pay federal income tax on your royalties and possibly state income tax depending on where your minerals are and how much income you have.
For income tax, you will have to determine if the extra income from royalties is going to boost your income to a level where the IRS might enforce a penalty. If you are already paying quarterly taxes, simply add the income to your estimated tax calculations at the end of each quarter. Here's the quote straight from the IRS:
"Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller." You can read the entire note here: http://www.irs.gov/taxtopics/tc306.html
Property taxes are a different animal. The appraisal district will make an estimate of what your minerals are worth and you'll pay the normal rates based off of that. I've seen estimates that were ridiculously high and low, so you never really know what you're going to get from each county. There's an article under the "Help" tab above, but it can be found HERE
When you make your first federal filing they will not be pleased that you received money without them getting their piece of the action. For the next year you will have to pay quarterly estimated taxes based on the previous year's income. This will adjust from year to year. You will need to also pay taxes to the state of North Dakota, and, it the amount is high enough, they too will want you to submit quarterly estimated taxes for the next year. The one bright spot is that most of the various states honor payments to one another. I live in Mississippi and their policy is that as long as I've paid income tax to ND on my royalties then I don't have to pay to Mississippi. I assume most states have this reciprocity.
I live in Texas and the minerals are in Texas, Just a a different county. But I have a sister who live in a state where I think they also pay state and federal taxes
Hal Stoen said:
When you make your first federal filing they will not be pleased that you received money without them getting their piece of the action. For the next year you will have to pay quarterly estimated taxes based on the previous year's income. This will adjust from year to year. You will need to also pay taxes to the state of North Dakota, and, it the amount is high enough, they too will want you to submit quarterly estimated taxes for the next year. The one bright spot is that most of the various states honor payments to one another. I live in Mississippi and their policy is that as long as I've paid income tax to ND on my royalties then I don't have to pay to Mississippi. I assume most states have this reciprocity.