Tax Question

In the middle of January, 2015, we received our first check from EQT on the first production of a new well (the production occurred in 2014). We then received a 1099 from them for 2014 even though we were not paid until 2015. Is this correct? If so, what about checks we may receive for wells we know that were producing in 2013 and 2014, but have yet to be paid on. Assuming we get paid after April. Do we have to go back and amend our 2013 and 2014 tax returns? Something doesn't seem to add up, but maybe its just my lack of knowledge about accounting.

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Permalink Reply by AJ on February 17, 2015 at 1:59pm

I am a tax professional. will give a few tidbits but can not give advice on how to proceed in your case. Every one that receives a check for royalties dated late in the month faces this issue at some time whether they realize it or not. There is nothing wrong with the 1099-misc. That is based on when the check is cut. if the check is in the mail over the new year you have a constructive receipt decision to make. Do I declare it on last year's tax to match the 1099 or back it our of my tax return and claim it in the year actually received? There is an easy way to do it, the IRS sees it all the time and tells you how to do it correctly. Writing a letter to anyone will not do a thing. Most of the time the easy thing is to match to the 1099 and go on from there. Most of the time this will not change the overall taxability of the money. But not always. Each situation is different. Find some one that has experience in this type of income and pay for their help. One quick comment on a prior comment, not all lawyers know taxation, actually very few do, not all CPAs know individual taxation, Enrolled Agents (EA) are tax specialist and are licensed by the IRS. Do not overlook them. And some other tax preparers are quite good even without a designation.

Permalink Reply by bo boboski on February 18, 2015 at 12:08am

Check this out. I couldn't pay my taxes due to the IRS last April ,so they set me up with a payment plan, XX amount of $$ due on the 1st of every month. Thing is, if  they do not get that payment pay the 1st, they charge me a  33% penalty . Regardless sent it, or what date it was postmarked. I could have sent it 20 days earlier,but if that check is not at their office by the 1st, where they can "constructively " use it. then it's considered late!

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