DR0021W – Ad Valorem and Severance Taxes

DR0021W


Colorado severance tax is a tax imposed upon nonrenewable natural resources that are removed from the earth in Colorado. The tax is calculated on the gross income from “crude oil, natural gas, carbon dioxide, oil (including shale oil), and gas severed from the earth in this state. See Colorado FYI General 4 for more details.

If a client receives a DR0021W to report ad valorem and severance taxes for oil and gas income, those taxes can be deducted on Schedule E associated with the 1099-MISC royalty income. However, Colorado severance tax refund must be reported as income on your federal return if it was used as a deduction on the Schedule E for the previous tax year.

Colorado Severance Tax Oil and Gas Return (DR0021)

If the client has a total of more than $250 of income shown on their DR0021Ws, they should file a Colorado Severance Tax Oil and Gas Return (DR0021). This return is in addition to the CO104 Income Tax return and may result in the refund of the severance tax shown on the DR0021W. The Severance Tax return is  OUT OF SCOPE  for the Tax-Aide program but it does not put the Income Tax return out of scope.