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    kayaks3's Avatar
    kayaks3 Posts: 1, Reputation: 1
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    #1

    Mar 25, 2007, 11:34 AM
    1099 misc
    I have nonemployee compensation reported on 1099 misc form (box 7)from oil and mineral rights. I am retired and have never been to the site of this oil well. Do I have to report that income on Sch. C and pay social security and medicare taxes on it as well?
    Thank you for your answer.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #2

    Mar 29, 2007, 10:43 AM
    Contact the issuer of the Form 1099-MISC. The income should be reported in Box #3 (Other Income).

    Have the issuer issue a corrected Form 1099-MISC, then you can report the income on Line #21 (Other Income) of Form 1040 and avoid paying self-employment taxes on this unearnmed income.
    Mobea's Avatar
    Mobea Posts: 220, Reputation: 15
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    #3

    Mar 31, 2007, 09:41 PM
    Actually, the income on the 1099-Misc should be corrected to read 1099-Misc ROYALTIES INCOME.
    This is reported on Schedule E (Rental/Royalty Income) which is passive income. This is income that you received because you purchased at some point or other, mineral rights somewhere. It kind of like investing in an oil well somewhere and someone else is doing the drilling. That's why it is "Passive Income". You don't have to do anything. You just invested to the rights of the well, not the oil it produces. Also on the schedule E under the expense line "DEPLETION" take 15% of whatever the amount that the 1099 was issued for and deduct that because every year, they use up a little more of your "well". You do not pay social security or medicare on passive income and your losses are not limited by income.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #4

    Apr 5, 2007, 12:35 PM
    Agreed!
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #5

    Apr 5, 2007, 12:45 PM
    Agreed!
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