Understanding Royalty Payments


#1

I was wondering about a couple of things. What frequency are these payments made, monthly, yearly, etc? Secondly, I am getting the idea from this forum that the IRS and the county of production also gets some tax information, is this in the form of an actual tax payment, or just a report of the royalty subject to ta?


#2

How frequently you are paid depends on the production, sales, royalty decimal and other factors. Most companies prefer to send checks once the total royalties due total $100 or more which could be monthly, every few months or annually. The oil company will send a 1099 (similar to what the bank sends with annual interest on bank accounts) to you and to the state where the wells are located. You will report on Schedule E of the tax return, the gross royalties, less severance taxes, costs, property taxes and depletion. You will receive tax statements from the county appraisal district for your decimal share of the well value.


#3

Thanks so much, you have extended my understanding considerably. You have also given me an insight to another problem I have been trying to solve. Payments have been made to a deceased persons estate for 21 years, the executor has been cashing the checks for herself. I am having no luck at all getting the oil companies to tell me the amounts of these payments.
From what you have said, I should be able to go to each of the counties and search tax records by that persons name to discover every royalty check ever sent out. Am I correct in this deduction>


#4

No the royalty payments, just like interest on your bank account, are not public. The county assesses property taxes on the value of the producing minerals which are real property - just like the property tax on your house. You may want to check the various county appraisal district records to be sure that the property taxes have been paid and are up to date. You may also want to check the deed records to be sure that the minerals have not been sold by the estate over the years or if title was transferred to some other party. From your other emails, it seems that your daughter is an adult and is the beneficiary of an estate, which may or may not be in a trust. As a beneficiary, she can demand an accounting from the executor or trustee, including the tax returns. It would seem that her best course of action is to consult a qualified estate and trust attorney, taking all the probate records, including the will, to see what her rights, responsibilities and options are in this situation. This is not something that you can do on her behalf as you do not appear to have any legal standing, unless she is incapacitated and you have been appointed as her guardian or some similar situation.


#5

As usual, thank again for shedding some more light on my predicament, Your explanations do leave me bitter and somewhat defeated though.
To clarify, my daughter is the legal heir to these mineral rights, she is a department manager for a major retailer and had decided to roll over and play dead when she found hurdles, I am an old retired combat Amy Officer who never got anywhere by running away from a fight. This was my father-in-law, he and I drove to these sites to check on the wells. She has given me a full power of attorney to try and find some justice for her. It appears that the crooked person is the only winner in this. The tax records are secret (to shield the crooked person), her records are secret (for her privacy, and the oil companies are disinterested in the fact they paid a dead man for 21 years AND STILL ARE!! Oh yeah, the IRS is getting a 1099 for 21 years for a dead person, they don’t care either. Although the oil companies will not share the checks they wrote, at least one has claimed to have put their payments in suspense, I suppose until they can verify what I have provided them.
I still cannot accept that our country is set up to enable such a thief, insure that they can continue to steal for 21 years, and to prevent anyone from bringing such a case to light. Useless as you project the fight might be, I am not thru fighting yet.
Also: there was no trust, the probate was closed some time ago, the mineral rights were not sold or transferred to anyone else…