I have a question about my 2025 taxes, specifically my 1099 from EOG. (I’ll make up the numbers for ease.) There is a gross amount in box 2 of 50,000. All other boxes are empty. Above the form, they have typed:
Taxes= $5000
Other deductions= -$2000 (a negative number)
Net= $47,000
The net does match the amount of my take-home money from EOG. But as you see, they added the $2000. I called to ask EOG about that; they said it is a reimbursement. How do I account for the $2000? I’ve googled and used AI, and some say that I don’t have to account for that $2000 at all since reimbursements are not income, and I should just put the gross on line 4 of Sched. E, put the 5,000 on line 16 for taxes, put the 15% depletion number on line 18. Then subtract the taxes and depletion from the gross and write that number on line 22. But that seems like my taxable income is $2000 less than what I actually received. Another person told me to just subtract the net from the gross and put that number under taxes, so it all evens out. I’ve looked at my first pay stub from EOG for January 2026, and I see this same thing happening with a negative number listed, which is added in to get to the net (take home), so this will continue to be an issue. I’d really like to do my taxes myself and I want to do this right. Have any of you encountered this, and what do you advise? Thanks.
Each month your EOG checks covered current production, and some months there were also adjustments for prior months (PPE = prior period adjustments). These PPE are based on audit and internal revenues of prior accounting. Some of those could have been reductions of past charged severance taxes or costs (this is refund of overcharge and puts money in your pocket. For example, you might have been charged $500 of costs and then get it back. Apparently the “refunds” exceeded current costs. So the 1099-M is correct. You report the $50,000 as Gross Revenues since that is accurate. Then you can enter the $2,000 as a negative cost (reimbursement credit) and the severance tax as a deduction. Google and AI are sources of much inaccurate information as they regurgitate unfiltered information from all kinds of sources, many of which are bizarre. You need to ask for the original source of the claim and then research that source. Reimbursement of personal expenses is not income because you did not deduct the expenses in the first place on your tax return (think of overcharge for auto repair). That is not the case for business costs which you have previously deducted on your tax return. Consider this as an alternative to determining how much erroneous costs were deducted on one or more prior returns and and then amending those prior returns to properly report higher net income.
The correct way to report is either reduce your tax amount by $2000 (and make it $3000) or add (a negative negative is a positive) $2000 to the other deductions line. Schedule E will then balance with the net royalties received minus depletion. The reimbursement is income, the same as it is a reduction in your post-production expenses.
Thank you. Honestly, I don’t know how to do the research I’d have to do. I’ve called EOG and they do not know the answer. All I got was, “It looks like there was a big reimbursement last August.” And my guess is that the tax person I’ve used in the past won’t know the answer either. I get that AI can be inaccurate, that’s why I’ve asked the question here. I’ve looked up individual statements, and …..who can follow all the pages of numbers to make sense of it?
Seems pretty simple to me. Your “other deductions” are actually “other income”. This could be due to a refund of prior expenses, an error in past accounting, a lawsuit won that redistributed costs to another operator, or some other factor. The cause doesn’t really matter - it’s a big reduction in your “other dedeuctions”, i.e., it’s income. So the 5,000 in tax expense plus the 2000 in income results in a $47,000 net.
So on Schedule E, under tax expenses, should I enter $3000 instead of the $5000 to offset the $2000 added? Google tells me that a reimbursement is not actually income, since you were overcharged for something earlier and they are just paying you back. I keep getting conflicting info.