If jagged peak sends a 1099 form showing they paid the taxes on our royalties, do we still owe taxes on it?
Are you sure that you received a W-2 for earned income? That does not make sense. You should have received a 1099 listing your royalty income which you report on Schedule E and then you pay income taxes. The 1099 may show a deduction for “taxes” but that is normally the severance taxes which were deducted on your checks. Severance tax is 4.6% on oil and 7.5% on gas and is paid to State of Texas. It is somewhat similar to a sales tax. The severance tax, as well as other costs deducted from your gross royalties, are reported as line items on Schedule E and reduce the net income on which you pay income taxes. You are also entitled to depletion deduction. You should go over this with your CPA or other tax preparer.
Sorry, it was a 1099. E.A.is working our returns. Thankyou