Frequently Asked Questions
Q: Why should I contact a CPA?
A: CPA stands for Certified Public Accountant and is a credential that is synonymous with trust, integrity, high-level thinking and sound advice. What that translates into for you is a professional that has extensive training in many areas. Unlike some tax preparers who work just several months out of the year, CPAs are fully engaged in interpreting and applying tax law year-round. For More Information
Q: When should I contact a CPA?
A: When you have a question and before you make a major financial decision. I can’t tell you the number of times I have told a client I wished they would have called me BEFORE they did something so they were better informed before they made the decisions that affected their taxes.
A: The CPA is very competitive in their pricing and most often not as expensive as national firms. Their year-round focus on taxes makes them a valued advisor. A good CPA will pay off in the long run.
A: We do not quote tax preparation fees. Our base fee starts at $125. We do not charge on a per form basis, rather on a value based level of work and service. There is a reason why we have prepared over 17,000 returns – our fees are reasonable and affordable.
A: Pricing varies depending on the level of service. Currently, based on the size of our small business clients, our monthly fees range from $50 to $400.
A: Did you receive or expect to receive additional income during the year? Your CPA will help you understand the tax consequences of this additional income and discuss ways to save taxes before the end of the year. CPAs work on taxes year-round and the best way to save taxes and understand your tax situation is to consult your CPA before and after major changes occur in your financial situation.
Q: I am going to be receiving a lease bonus check, how much will I owe in taxes?
A: My quick answer is usually 1/3 of the bonus amount. There is much more to the answer though that involves estimating your taxes and all of your income for the year, potential tax planning options and the timing to making estimated taxes to get a more accurate picture. Call Yourkovich & Associates to understand the tax ramifications and tax planning options when receiving gas and oil income before you sign and during the year so we can do in-year tax planning.
Q: I am receiving royalty checks, how much will I owe in taxes?
A: My quick answer is usually 1/3 of the royalty amount. There is much more to the answer though that involves estimating your taxes and all of your income for the year, potential tax planning options and the timing to making estimated taxes to get a more accurate picture. Call Yourkovich & Associates to understand the tax ramifications and tax planning options when receiving gas and oil income during the year so we can do in-year tax planning. Don’t forget to save for your future real estate tax bill.
Q: Is your Form 1099 from gas and oil royalties correct?
A: The gas company is required to report the gross royalties on Form 1099. The amount in the Box 3 of the 1099 should not match your net checks unless you have a no deductions whatsoever lease. All deductions from your gross royalty check are eligible expenses for the mineral owner’s tax return.
Q: Did your tax preparer ask for supporting documentation related to your gas & oil 1099s?
A: If not, change preparers and get your returns reviewed by a qualified CPA (Get a free tax review). The agreements and documentation support how payments should be treated and reported for tax purposes. The 1099s are not always prepared correctly so we rely on the agreements and paperwork to support our tax positions. If these documents were not reviewed and correctly understood to the type of income received, then you may have reported it incorrectly and more importantly cost yourself a considerable amount of undue taxes.
Q: The landman for the gas company told me __________ (fill in the blank here) was not taxable?
A: Wow, have we heard this a lot the last few years. The gas company is not an expert in tax laws. They are salesmen that want your signature. Educate yourself before making these decisions by calling your CPA.
Q: I did not receive a Form 1099 for _________(fill in the blank here) do I have to report the amounts received on my tax return?
A: Omitting reportable items from your return can have serious consequences. Understand the ramifications of not reporting including the potential penalties and interest associated with underreporting income.
A: Most likely, this was not the proper treatment of this type of income. I hope you don’t get audited.
Q: I reported 100% of my pipeline damages and then deducted 100% as basis so that there was no tax consequence on my return?
A: Two important facts will govern if this was the correct tax treatment. First, actual damage to your property occurred and it can be documented. Second, you must have basis in the property that is damaged. Damages are only non-taxable in an offset to basis and you have to have basis first.
A: Before you sell, call your CPA to discuss the tax advantages and disadvantages of the sale. Selling your mineral interests is a multi-generational decision that you should educate yourself fully on before making such a decision. Yourkovich CPA can help educate you on this decision.
Q: What is the difference between ordinary income and capital gain income?
A: Ordinary income is taxed at your regular tax rate. Long-term capital gains are taxed at a lower tax rate. Significant savings can be realized if income qualifies for capital gain treatment.
Q: Does gas and oil income affect my Social Security benefits?
A: Income from gas and oil does not affect your gross benefits from Social Security regardless of your age. So even if you are not at full retirement age and are receiving Social Security your benefits will not be reduced. On the tax side of things, your Social Security benefits (or more of your benefits up to 85%) may be taxable due to this additional income if you are over certain limits. Must I pay taxes on Social Security benefits? The second thing that could happen as a result of this additional income is you could be subject to a Medicare Part B premium surcharge. Your premium is determined each year based on two years’ prior modified adjusted gross income. How much does Part B cost?
A: In WV, your minerals are taxed based on production. Before production you will be assessed a minimum value to get you on the tax rolls after a lease has been signed. Keep in mind your royalty check date is usually at least 30 days or more behind the production dates, therefore adding up your royalty checks received in a calendar year will not produce the correct answer. You need to reference the production dates on the royalty checks. WV Real Estate Taxes on Minerals
Q: I received a WV real estate tax bill for my minerals and I don’t agree with the value, what do I do?
A: Owners of mineral property who wish to protest the assessed value of their property must file a protest with their county commission sitting as a board of equalization and review that begins meeting for this purpose on February 1 each year before the property taxes are due for that year. Ask for the evidence (calculations) in an assessment dispute.
Q: I have property in Ohio and receive gas and oil income. Am I eligible for the Ohio Small Business Income Deduction?
A: My answer has changed on this topic recently and so has guidance from the Ohio Department of Taxation. It seems the Tax Department changed their mind in April 2017 on guidance to taxpayers regarding gas and oil income on the FAQ section of their website. Discuss this tax issue with your CPA to fully understand the eligibility of this state tax savings deduction.