SherWare Knowledge Base
Withholding Taxes
Withholding Taxes
Enter the tax for each owner using the Well Revenue by Well (8/8ths) screen. Select the type of tax from the Type pull down menu. You can leave the units, and price fields empty so that it's not adjusting your MCF totals on the well. You can even set up yourself as a Purchaser so that they appear as the purchaser instead of the original gas purchaser. Use the Allocate All To field to enter the owner ID of the owner the tax amount should be allocated to. When entering the taxes in this way, the tax will appear as a tax on the owner's statement, as well as the 1099. However, the tax will not appear as a state tax on the 1099 because state tax is not a valid revenue Type to choose when entering detail through the Well Revenue by Well (8/8ths) screen. Therefore, if you wish the amount to be reported as state tax, you'll need to manually adjust the owner history records for the affected owners after the run is closed. This is done through the Owner History screen. You'll reduce the amount of regular tax (GTAX1 for example), and increase the 'Tax W/H' field on the Taxes tab of that screen. Since the 1099s are based on owner history, it's necessary to modify the owner history record in this way so that it is reported as State tax on the 1099, and not general well product tax.
Specify the rate of tax to be withheld on the owner's interest in the well using the Division of Interest screen. Enter the rate as a whole percentage in the State Tax W/H Pct field on the owner's interest. The system will then automatically calculate the state tax to deduct from their revenue on that well interest during the revenue run closing. The total state tax withheld will be reported on their owner statement at the end of the statement's activity, and it will automatically be reported as state tax on the 1099. It will not affect the production figures on the well such as MCF, expenses, or taxes. The amount withheld for state taxes can be reported on the Owner Backup/Tax Withholding report. This method does not require any manual calculation of state tax, nor any manual entry of the tax amount to be deducted from the owner's revenue.
Is your company responsible for withholding the tax on the well revenue, and remitting it to the state? OR, is your purchaser withholding the tax before sending you the revenue on the well?
1. If you are withholding it and remitting it to the state: Set up a Well Product Tax Table from the Maintain menu. Enter the rates as decimals in this screen for Oil Revenue, Gas Revenue, or Other Product revenue. You can also modify the name of the tax in this screen. Then, choose whether the tax should be calculated as Amount (based on the units, such as MCF or BBL), or as Percentage (based on the dollar amount of revenue). You can enter up to four separate tax calculations in the Well Product Tax Table. Once you have the tax table defined, open the Well Information screen, and associate the well with the tax table you've set up. This is selected from the Tax Table pull-down menu on the first tab of this screen. Be sure to save your changes. This will cause the system to calculate the tax for this well based on the revenue allocated to this well in the New Run. You may need to re-save the revenue entries you've already entered if they are still in the New Run.
2. If the purchaser is withholding the tax before sending you the revenue: In the Well Information screen on the Taxes tab, check the option that Purch W/H OTAX1, or GTAX1, etc for however many taxes are being withheld. This will allow you to manually enter the tax amounts being withheld when you enter the Production Receipt. You'll have a line of revenue before tax, such as MCF or BBL, and then a second line showing the tax withheld, such as GTAX1 or OTAX1.
You can enter the state withholding percentage on the Division of Interest screen for the owner. If they have multiple interests then you can fill it out on each interest. The software will automatically deduct this from the checks. It will post these amounts to the "Backup and Tax Withholding" account you have specified in Maintain > Disbursement and JIB Options > Accounts tab. When it is time for you to pay these you will have to do it manually. You can see the amount to pay b looking at the account that is accumulating the withholding.
Sounds like the option 'Purchaser W/H Tax 1', etc. is not selected for those wells in the Well Information screen on the Taxes tab. Therefore, the system is wanting to calculate the tax in addition to what you enter on the Production Receipts screen. In that Taxes tab, there's an option for each of the types of tax that can be withheld; select the ones that are applicable, and then click the Save button on the toolbar to save the changes. Once those options are chosen correctly, you can go to the Utilities menu > Remove Revenue Run from QuickBooks. Select the run number that posted those tax amounts to your Catch-all account, and then remove it. You do NOT have to open the run, only remove it from QB. Once it is removed, you can then post it again from the Tasks menu > Post Revenue Run to QB. It will now post to QB using the current options selected regarding the purchaser withholding tax.
Out of curiousity, when you enter the Production Receipt, are you entering a detail line for the amount of tax that the purchaser withholds? (2 detail lines: 1 for revenue, 1 for tax withheld) OR are you entering a revenue amount that is net of tax? If the purchaser is withholding the tax, you should be entering it as 2 detail lines - 1 for the revenue, a second detail line on the same well for the amount of tax withheld.
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