Why does an oil drilling co. need a W-9 tax form from residents?

Question

What is the purpose of an oil drilling co. needing a W-9 tax from for. how does it affect your tax return? Are you just being taxed for what they pay you for drilling on your land?

Answer 1

Yes any payments you receive from the company are considered taxable.

The W-9 means that it gets correctly reported to the IRS.

If you don't give them a W-9, they will have to do "backup withholding" which I believe is 28% of any payment made to you.

So, just fill it out correctly, mark the box "exempt from backup withholding" (unless the IRS has told you that you are NOT exempt) and make sure you the income received (you should get a 1099 at year end if they pay you more than $600 in a year) on your taxes.

See a tax professional as there may be deductions you can do to cut the income.

Answer 2

IF they are paying you, you have income. They need your name/address and social security number on the W-9 for their records and so they can send you a 1099-Misc at the end of the year.

If you do not return the information, they will be required to withhold 28% of each payment and send it to the IRS. You would then include the withholding on your tax return when you file.

PS, the income is taxable whether or not you get a 1099-Misc form; it's taxable whether it's $1 or $1000.

Answer 3

All companies are required to report payments made to entities which are not incorporated. Payments made to individuals, like the royalty payment you are receiving, must be reported to the IRS via a Form 1099. You will receive a copy of that and will need to include that amount on your 1040. The 1099 is similar to the form you receive from your bank for interest you earned.So, the drilling company is doing this because they are required to do so.

Answer 4

If you are getting royalties from them, then they need your social security number to send you a 1099 for the amount they paid you. Yes, that is taxable income and you must report it on your tax return.