On a 40,000$ bonus!!! Can anyone tell me what taxes will be due. Its through my mothers probate estate. The representative is supposed to be meeting with a CPA but I would like to know for my own peace of mind plus the CPA is in a different state so wanting to know Oklahoma's tax law on lease bonus payment. Anybody that has any input please let me know!!!
the estate will need to pay taxes -- both Fed and OK state for the Bonus. The rate depends on the marginal tax rate the estate is at.... and of course the deductions for the estate -- don't forget to deduct depletion which OK allows at 22% vs Fed 15%.... So, as far as giving you a number it's really hard. For Federal I usually guess at 15% for Federal if other estate income is about 100K. For OK maybe 2%. If you or your CPA have access to the other income of the estate then a much better estimate can be made......
FYI -- I am not qualified to answer this question , I am not a tax expert or really that knowledgeable -- only treat this response as maybe friendly noise -- nothing more...
Carter,
The IRS couldn't care less about your peace of mind. It just follows the rules. Your mother's reps CPA has access to the rules. My experience as an owner and manager of minerals in OK tells me the following:
- When the lease was signed, the lessee asker for a W-9 form that shows a Tax ID number. (Probably your mother's Social Security No.) The lessee submits that info to the Treasury and a 1099 will show up within 2 months of the end of the calendar year in which the payment is made.
- The 1099 should be provided to the tax preparer of inclusion in the Taxpayers return as ordinary income. In your mother's case, it can be included in the final estate tax filing whenever that is due.
- The estate CPA must combine it in the final return and the rep will warrant that taxes have been paid during the probate process.
- The CPA will know if a filing must be made in OK for the bonus or other income. The filing is usually a summary page with the federal filing attached.
Of more importance, is the planning of the administration of the lease. I will, most likely be the last lease you will ever see so hold it together under one ownership so that it all be more valuable to the industry in the future. I'm confident that you will receive purchase offers sooner or later; highly discounted to the true fair market value.
If you don't sell and production royalty is received, it will be paid net of OK's withholding statutes. To reclaim the withholding, you must file with the state using the federal return. In the federal return you will be able to take a deduction called the allowed to take a depletion allowance. Unless, of course that that allowance is lost with new tax laws.
Bottom line: Allow the legal process to work out. The estate rep is responsible and the CPA must be allowed to do its job. That is why they are "Certified" Figure out with the heirs how to best administer the mineral lease and other mineral rights for the future of the heirs.
Thank you. The estate has no more income to file on. This whole probate process I don't understand. We have been waiting to receive the final tax refunds for my mothers estate for a very long time. Don't know that to be truth but I was told. The estate has had no activity since sept. 2014 when my mothers house was sold. I don't understand with two reps and an attorney how we can't figure out what is wrong because with this extended timeline there must be a problem. I had ask why the minerals couldn't be decided a long time ago. I keep getting excuses and really no knowledgeable answers from anybody that has ties with the estate. Thanks though.
Thank you. I've been patiently waiting on the legal process. There's been no activity since sept. 2014 when the house was sold. My sister is the rep so it seems to me she doesn't want it divided because she's afraid us other two will sell ours and she's insisting it stay in the family. We missed out on a lease in 2014 because she had a bad feeling. I just want it all to be over. My question earlier was trying to gain a little knowledge so me and my brother know what to expect financially. Thank u.
Carter: My recollection is that the lease bonus is taxable income, and you get no depletion allowance because it is not connected to actual production. After production starts I dunno if you can deplete the bonus.
OK has a special provision that Depletion can be claimed on the Bonus; however, must be reversed back out if production is not achieved ( see OK- sch 511-b line 5 -- I think ) also see sch 513NR line 11 if Non-res
I think there is a twist to this. If you have already taken a 15% federal depletion you may be limited to an additional 7% in Oklahoma. You may need to check this out; my CPA did all the work.
Jim B