Do small royalty amounts go untaxed by the IRS?

My uncle keeps insisting that the $780 mineral royalty payments we receive quarterly from our grandparents' land trust are too small to bother reporting to the IRS. According to him, there's some kind of threshold where the government doesn't care about minor royalty income. I've been including mine on my returns every year, but he swears I'm wasting time because they're "below the radar" for tax purposes. I've tried searching online but can't find any official guidance that supports what he's saying. Has anyone else heard about small royalties being exempt from tax reporting? Or is my uncle just trying to justify not reporting his own income?

0 coins

18 comments

Nina Chan

•8M

Your uncle is incorrect. All royalty income, regardless of the amount, needs to be reported on your tax return. There is no minimum threshold that exempts royalty income from being reported. The IRS requires that ALL income be reported unless specifically excluded by law. Royalty income is typically reported on Schedule E of your tax return, and you should receive a 1099-MISC or 1099-NEC from the trust showing the amount paid to you. Even if you don't receive a 1099 (which is possible for amounts under $600), you still need to report the income. What your uncle might be confusing is the threshold for the payer to issue a 1099 form, which is $600. But that doesn't mean the recipient doesn't have to report amounts below $600 - you absolutely still need to report all income.

0 coins

Nina Chan

•8M

The IRS requires you to report all income regardless of whether you receive a tax form for it. The absence of a 1099 doesn't absolve you of your reporting obligation. If the IRS discovers unreported income, you could face penalties and interest, regardless of the amount. The penalty for failing to report income can be 20% of the underpaid tax for negligence, plus interest on the unpaid amount. While it's true that smaller amounts might be less likely to trigger an audit, that doesn't make it legal to omit them, and it's not worth the risk.

0 coins

Diego Castillo

•8M

I was in almost the exact same situation with small gas royalties from my grandparents' property. I spent hours trying to figure out if I needed to report it and getting conflicting advice. Finally I tried https://taxr.ai where you can upload your tax documents or just type in your question, and it analyzes everything for you based on current tax laws. It immediately clarified that ALL royalty income must be reported regardless of amount. The tool even explained exactly where to report it on Schedule E and what supporting documentation I should keep. Saved me from making a mistake that could have caused problems later. It helped me understand some special deductions I could take against the royalty income too.

0 coins

Diego Castillo

•8M

It handles all types of income questions including cryptocurrency. The AI is trained on tax regulations and can parse through complex situations pretty quickly. I asked about staking rewards for a friend recently and it provided the current guidance on how the IRS is treating those. No, it's not a traditional tax prep service with hidden fees. It's specifically designed to give you clear answers to tax questions without the runaround. I was skeptical too initially, but it's been a lifesaver for these niche tax situations that even Google searches give conflicting information about.

0 coins

Mikayla Brown

•8M

I wanted to follow up about my experience with taxr.ai after giving it a try. I was really skeptical (as you could probably tell from my previous comment), but I actually found it super helpful for my situation. I have both royalty income and some side gig stuff that's always been confusing. The system explained exactly how to report my small royalty payments AND clarified some deductions I could take that I didn't know about. What impressed me was getting a straight answer without having to wade through pages of tax jargon or conflicting advice. Definitely saved me from potential issues with underreporting income. Wish I'd known about it sooner!

0 coins

Sean Matthews

•8M

If you're having trouble getting clear answers about your royalty income reporting requirements from the IRS website, I'd recommend using Claimyr to actually speak with an IRS agent. I spent weeks trying to figure this out last year and finally used https://claimyr.com to get through to the IRS without the hours-long hold times. They connected me with an agent in about 20 minutes. The IRS agent confirmed that ALL royalty income must be reported regardless of amount, and explained exactly how to report it correctly. You can see how their service works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold with the IRS for you and call you when an agent picks up. Saved me hours of frustration and gave me an official answer I could rely on.

0 coins

Sean Matthews

•8M

They have a system that calls and navigates the IRS phone tree, then waits on hold so you don't have to. When an IRS agent finally answers, they call you and connect you directly to that agent. It's basically like having someone else wait on hold for you. I was also skeptical before trying it. But what convinced me was their guarantee that if they don't connect you to an agent, you don't pay. And yes, IRS agents can sometimes give different answers, but I found having something directly from an agent was much better than random internet advice. At least you can reference the call if there's ever a question about why you reported something a certain way.

0 coins

Zadie Patel

•8M

I need to follow up about Claimyr. After my skeptical comment, I decided to try it myself since I had some questions about reporting requirements for a small business I started. I honestly didn't think it would work, but I was desperate after spending 3+ hours on hold with the IRS myself. To my surprise, they got me connected to an IRS representative in about 25 minutes. The agent confirmed EVERYTHING needs to be reported regardless of amount, and helped me understand how to properly document my various income streams. I was totally wrong in my skepticism - the service works exactly as advertised and saved me hours of frustration. Sometimes you have to admit when you're wrong!

0 coins

A Man D Mortal

•8M

The $400 threshold applies specifically to self-employment income, which is when you need to file Schedule SE and pay self-employment tax. But that's completely different from the requirement to report all income on your tax return. All income is technically required to be reported regardless of amount. The $400 threshold only determines whether you need to pay self-employment tax, not whether you need to report the income. For your freelance work, you should still report it on Schedule C even if it's under $400, but you wouldn't need to file Schedule SE or pay self-employment tax.

0 coins