I have another post on division order acres not matching my lease or county record problems with AEP. I told them I would not sign division order till it was straightened out. Guess what? got a royalty check that still has the wrong decimal (shorting my acres) and a laundry list of deductions. I have a no deduction clause in the addendums. No transportaion, no gathering cost, no market enhancement costs and I think several other items, but they just took out what they wanted. They assured me in prior communications, they knew of my no deduction clause and it would be taken care of and not to worry about it. I'm worrying now. I can see my attorney getting rich already. Also the royalty check is for Aug. The wells went into production back in June??? What happened to all of that production.???? To add insult to injury they did not deduct any state or federal taxes, (just ohio g/o severence tax) even though they have my W-9's and LLC employer ID numbers on file. Waiting on attorney to call me back. All we were expecting this week was a copy of survey report, not a royalty check. (since no division orders were signed)?? Looks like another chesapeak. I'll be speaking to others on this pad this week when I'm on vacation and I'll keep updating. Curious to see if their acres, decimals are correct and what they paid in deductions. Can't believe what a mess this all is. Thought it was a nice windfall, but it's becoming a real pain in the butt...........
Nope, we pay the state and federal taxes quarterly....
the W9 forms we got for 2014 listed the gross amount.
Very important to keep a record of the stubs which include the deductions/expenses so
when filling the tax report on the Form E, your account nets it out,. and
there is such as thing as depletion allowances. But your accountant has to determine if you qualify for the depleliton deduction. Depletion is to resources as depreciation is to capital equipment.
I also should mention something else regarding paying/filing taxes on royalties...
We have found when some companies( Not sure how this AEP outfit will do it??) issue the year end statements I think they are refered to as 1099 forms?? the ones that show how much they paid out in royalties to you. Some companies show the total amount paid to you without their deductions and you are expected to list the deductions as expenses on your tax return....
Also don't forget to have your accountant calculate depletion allowance for the wells for tax purposes...
Get ready your fun is just beginning.....
We are fortunate we have a retired CPA that is a member of our LLC where our royalties are paid too and he figures all this stuff out and dispurses the remainder to the rest of us... It is all very complicated.
I can understand tracking deductions from checks to list as expenses. But what is depletion allowance? I figure it must be different from deductions?
It's what the IRS allows you to deduct from the Royalties as a "depletion" of the natural gas resource. The resource is not renewable like timber or corn.. so you get to "deduct for the depleting resource".... basically you get to deduct 15% of your gross royalties for the calendar year..... every year you get royalties...
Thanks James, didn't know that. So an additional 15% along with cost of standard deductions. Now all I need is a unit!
I looked up DEPLETION on the IRS website, and it stated two conditions for being able to take the depletion allowance. Its not a slam dunk.
One of the conditions is the land had to be a capital purchase (does this rule out not being able to claim if the land was inherited?) Something else to ask the accountant!!!!
Matthew, What wells are you in that you are waiting for DOs?
wow that sucks.............but almost expected...........please keep us posted Brian.
I talked to a CHK leased 100 acre landowner yesterday who is now receiving $1,500 a month royalty with a 17.5% Gross lease.
During our discussion he told me that neighbors on REX Energy Wells are being shorted royalties similar to CHK. I figured this would happen.
Hopefully landowners will begin to take action by contacting those lawyers in Washington that are already on our payroll and stop getting MUTED by private lawyers who plan on cashing in on their clientele.
A few good lawyers could more than likely cure the countries O&G Royalty issues by contacting the authorities in Washington, but that would not be profitable, only the right thing to do.
With the Dept Of Justice now going after CHK, we can only hope that they will make an example out of CHK that will make those producers who are undecided about being honest think twice about stealing from the landowners of Appalachia (not the Appalachian Basin but Appalachia). The rich robbing the poor in Appalachia, shame on all the ceos and politicians who have allowed this to happen.
Hopefully corrupt politicians and ceo's will find themselves in Federal Penitentiaries as the Citizens of each state begin doing more than just voting then letting their Public Servants spend their time in office finding ways to accumulate wealth.
Thank you for posting, could you shed some light on your lease ?
Land group negotiated 20 % gross lease ? (Like XTO deal, KGWD, Shell,Gulfport, ect )
What percentage were your deductions ?
It is very important for many of us to understand what we are going to be up against with McClendon.