Today my wife and I received our Form K-1 from Sandridge. I guess they're within the deadline, but we filed early last month and our refund is already spent. I would ignore the fact that I reported all our distributions as ordinary dividends since , once our Social Security income is backed out, we are somewhat south of the poverty level. But another late document came in the same mail. A 1099R for our farm included some of the wife's nephews rent income. (The farm is in Oklahoma. We don't live there, just rent out the wheat cropland.)
We should file an amended return, or we could just wait for the IRS to question the discrepancy. Thinking the amended return would be simple enough, I looked at the K-1. To my surprise, much of the distribution is interest income - and 13% of all the income was earned in Kansas. Now, being an Okie that shops is Muskogee, I've no desire to file a Kansas tax return.
Worse yet, box 14 for Self-employment earnings shows "STMT" which I guess is the one showing interest, royalty, hedging loss, royalty deductions, and then cost depletion which equals 66% of royalty income. Now if we show the interest income on line 8a it's not self employment earnings - that's good. Then by reducing the royalty income by the hedging loss and cost depletion, our net S-E earnings are under the $600 required before the dreaded S-E tax of 14% is due. But, I sure pity all you big boys out there. On top of the beating you've taken on the stock price, you have to pay self-employment tax. And I guess you'll need to file both Oklahoma and Kansas tax returns. Have fun.
Why would you file your taxes knowing you had not received the tax forms?
SDT does not pay dividends and the income on the K-1 is reported to the IRS so there is a good chance of an automatic paper audit due to not reporting income (computer checks don't match). Given your income it's unlikely to make much difference to the result but it's really not smart to file before you receive your tax info. And furthermore, if your finances are as you say, I question the wisdom (to put it very mildly) of putting your money into an extremely speculative security like this.
Are you sure Box 14 is filled in? I've not seen an SDR K1 but I do have one from Permian (PER) which is organized the same way where income is classified as Interest and Royalties (although it comes from Texas). I don't really see how those could be classified as SE income. And probably somewhere around 75% of the distributions are effectively taxed because of the depletion, etc so you may get money back if you reported them originally as non-qualified dividends and file an amended return which you should do.
I've looked again at the K-1, this time from the IRA account that didn't have any purchases during the year like my brokerage account did, where I was chasing my money. I was reading it wrong above. The "STMT" reference was under item #20 - I was reading it as across from item #14 for self-employment income. My S-E income is blank, thank God.
Also, it would seem that 59.5% of our distributions were "return of capital" after calculating and reconciling all the interest, royalties, hedging losses and depletion. But you don't get to call it ROC as a limited partner. So I guess it's on to Schedule E on our amended return. Bummer