Is the decimal interest on my Division Order right?


#1

Just got a DO from Devon. I have 5.33 acres and this is a 2 section well. I am leased for 3/16. The split for my section according to them is .5067. They say my decimal interest is .00079172. Is that correct? Also, they sent me a w-9 form. How do I fill that out or do I even need to? Thanks Marc


#2

Here is the equation. net acres/spaced acres x royalty x % perforations in your section. 5.33/640 x .1875 x .5067 =0.00079122 which is pretty close, so okay to sign. Since you didn’t give your section, I assumed 640 acres. Not all are 640. You do not have to fill the DO out to get the royalties in OK. However, they do need the W-9 in order to pay you and not take out the taxes as well. I always do sign them and send back certified return receipt because I want a record to match against my checks. Decades down the road, I have found the old ones my parent’s signed very helpful in correcting new operators mistakes.


#3

Ok, I am in 16-16-11. On the w-9 do I indicate somewhere how much I want taken out for taxes? I don’t see a place on there to say how much % to take out.

Thanks again for the help


#4

I just sign the W-9 and send it in. They will take out the OK taxes usually. If you sign the W-9, they don’t usually take out the federal. If you don’t sign the DO, they will take out about 28%. It usually says what the amount is at the bottom of the DO in tiny print.


#5

Thanks again. Hopefully will see a check soon.


#6

Hey Marc that looks really close based on your ownership. I would send in the W9 with your ss# or the tax I’d # if you have a trust, partnership etc. if you don’t send a W9 they can delay payment. Cheers to you and blessings.


#7

No just send it in. It’s income. They won’t dilly dally with your withholding. Good luck and enjoy.


#8

They take out Oklahoma state income tax for out of state residents only. The rate for this is 5%. Oklahoma residents are exempt from this.
If you do not submit an TIN (EIN or SSN) they are required to withhold 24% by IRS regulations. This previously was 28% but dropped in 2018 to 24%. This is called “backup withholding” Be prepared to file an Oklahoma state income tax. It is required if you make more that $1000. You may be subject to California state income taxes. I’d suggest putting 30-50% back to cover taxes, CPA, or attorney fees until after you have settled up taxes on the following year. If you see you are going to make in excess of $10-$15K in the year, I would ask your accountant about submitting quarterly tax payment.


#9

Thanks Jon


#10

Thanks for this info. Do you know if this will be considered as ordinary income?


#11

Yes, it is.


#12

M Barnes is correct, don’t worry about the deductions. In OK they have a set amount they take out for state taxes, since we are out of state we just file non-resident and OK Tax Commission sends us a refund of the state taxes. They don’t take out Federal. If you make a bunch of money you might have to pay the IRS something come tax time depending on what bracket you’re in, we’re retired so pay almost nothing. FYI - OK Tax refunds are darned slow! LOL


#13

Yes, they will likely not send you a royalty check until you’ve sent them the W-9. In our case Alta Mesa let me email it to them.