I was wondering if anyone else has this issue or can explain it to me. I have noticed over the past few years that state income tax witholding is being deducted from our royalty checks but it is not reported on our 1099's. State of Colorado will not allow me to claim the taxes that were withheld if it is not reported on the 1099 so basically I am paying state income taxes twice on these royalties. I cannot get any answers from Dept of Revenue on how the gas and oil company can deduct but not report these taxes.
I presume you know about the withholding from your check stubbs. Go see a tax lawyer. It may be that you can quit paying the taxes and when the state comes to you, show them the check stubbs and give them the address of the oil company. Quit giving free money to the oil company or the state.
My husband's a CPA. I have Oklahoma rights, but should be the same in states. He says that would be illegal. However, maybe you're misreading the tax and it could be production tax which is different.
Abigail,
The production and Severence taxes are listed seperate, this is definitely being called (in code, which is why I just noticed it) "state income tax witholding". We also just started getting hit with substantial deductions for "transportation" and (X other deducts) which no one at the oil and gas company can or will explain. I'm pretty certain we are getting ripped off, but not sure who to go to about it. All totaled, on average, 40%- 60% of our royalties are being deducted. Leaves us with a pitance.
I seem to to have the same thing going on what county is your minerals in?
Weld county Colorado, Anadarko/Kerr McGee. But I just read where Chesapeak is in some trouble for "irregularities" on royalty checks, which got me to wondering. What county are yours in?
I do a spreadsheet of all checks and put the headings such as gross, net, state witholding, production tax, severance etc. and then at tax time my monthly spreadsheet shows how much they took out in taxes and everything is right there for the tax man. My 1099's were not showing the withholding and by having the check stubs as proof and the severance and prod all spread out it shows how much they did take out. It is time consuming but it you keep up with it at the end I have 12 sheets, one for each month of what was deducted from my checks. I got money back from the state last year and the year before!
If you had a no deduct clause in your lease they should not be taking anything out for transporting.
any
Linda Scott said:
Abigail,
The production and Severence taxes are listed seperate, this is definitely being called (in code, which is why I just noticed it) "state income tax witholding". We also just started getting hit with substantial deductions for "transportation" and (X other deducts) which no one at the oil and gas company can or will explain. I'm pretty certain we are getting ripped off, but not sure who to go to about it. All totaled, on average, 40%- 60% of our royalties are being deducted. Leaves us with a pitance.
Oh boy. Looks like big oil is doing the same thing to you that they did to us. First, let me congratulate you on looking at the codes on the royalty stub. You know now that the oil co is withholding state income taxes from your royalty. I had the same thing happen to my NM royalties, and I did two things: first I called the oil co and they told me " state law requires the withholding" and when I asked for the code or NM regulation law number, they couldn't tell me. I intend to write the tax folks in Santa Fe NM and find out about that. I am not dodging taxes since I file a NM return each year and report the royalties.
Second, I noticed too that the tax withholding was not shown on the 1099 sent to me by the oil co. In fact, the NM tax people wrote me that I owed that much tax and reminded me I had not proved the withholding. When I again called the oil co, they issued me a corrected 1099 and that of course satisfied the NM tax folks. End of problem.
The other deductions and transportation now being deducted from your royalty check are not so easily fixed. Several royalty owners in our neck of NM (Union County) had to sue the oil companies over this more than 20 years ago, then again in the early 2000s, and I just feel that every ten years they have to be sued again, just to keep things honest! Thank goodness the judge in the case decided that this should be a class action suit. There was a settlement in the cases somewhat to the satisfaction of the royalty owners. This happened to be not a gas or oil deal but the mining of carbon dioxide gases.
I think you can find out about this by Googling Union County, NM CO2 case, or Bravo Dome CO2 Unit lawsuits. I can tell you that you need to consult a great (not good) natural resources attorney or maybe an oil and gas guy. These oil companies sometimes play fast and loose with royalty calculations.
Linda Scott said:
Abigail,
The production and Severence taxes are listed seperate, this is definitely being called (in code, which is why I just noticed it) "state income tax witholding". We also just started getting hit with substantial deductions for "transportation" and (X other deducts) which no one at the oil and gas company can or will explain. I'm pretty certain we are getting ripped off, but not sure who to go to about it. All totaled, on average, 40%- 60% of our royalties are being deducted. Leaves us with a pitance.