Hi all. I love this forum! I live in Georgia but have some mineral property in Texas. Our accountant in Georgia was not familiar with how to prepare our mineral rights but finally went back three years to amend a 15% depletion on gross revenue. Are there any other areas that we should be concerned about with mineral rights and taxes? I am trying to determine if we should find a tax professional in Texas (also licensed in Geogia) for help with our tax preparation next year.
It sounds like you own a royalty interest in these wells. If this is correct, an experienced CPA in your area should be able to tackle this. Even if he or she is not necessarily familiar with oil and gas, royalty interests are fairly easy to understand from a tax perspective.
If you own a working or operating interest in wells, I would recommend vetting your CPA to be certain he or she understands how to account for the different type of expense/capital items that come with owning the interests.
My past two accountants (over the past 30+ years) have always just considered the payments as income from royalties. Do you have a working interest as a partner, LLC or something similar that would make things more complicated? In some cases, the partnership would file and you would not involve your personal taxes.
Brad, @TayNeatCPA is spot on. Percentage depletion is very simple from a tax standpoint. If your royalties are being accounted for on Schedule E, then the depletion deduction is listed on that schedule. Your accountant should not have overlooked this deduction. If they did and that was the reason for the amended returns, then you should have discussion with them about any additional charges associated with those amended returns.
My family has a similar situation - live in Georgia but have mineral rights in Texas. I’ve been happy with their accountant in Atlanta (we use their Roswell office): https://cpalgm.com/ Hope that helps!
Thank you Cat. I will give them a call.
Thanks for your advice. I think they finally fixed the royalty interest deduction. We do have a very small working interest on a few older wells.
We do have a few wells with working interest. Very small payments. My accountant did something different than the royalty interest wells. I believe these were filed as a business entity.
Good advice. I made it known that I was a little miffed that they missed the depletions the past few years. They reduced my invoice amount for this year and amended previous returns for free. I still lost money due to paying taxes that I should not have paid. Lost high yield interest and investment opportunities.
I’d give Cat’s recommendation a call. I would be more worried about a CPA in Texas screwing up my Georgia state tax return!
Hi Cat. Do you know the name of their accountant at LGM?