Q & A – Can I deduct expenses against my oil and gas royalties?

I received royalty income from an oil and gas lease. There are deductions on the back of the form, but the income reported on the 1099 is the entire gross amount. How do I fix this error?

The 1099 is prepared correctly with the gross royalty reported. Oil and gas operations often list expenses somewhere else on the 1099 form or in a related document. Assuming the expenses are ordinary and necessary, they are legitimate deductions in determining the taxable amount. The information should be reported on Schedule E and carry to the income section of 1040.