Published on: June 1, 2016 Last modified: March 26, 2019

From Boom To Bust: A Bakken Oil Worker’s Story (Part 1)

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    This series follows the story of Joe, an oil worker who moved to North Dakota for an oil job. Joe is a composite of numerous people who have been in similar situations – we have combined their stories to protect their identities and to show just how common tax issues are in the wake of the downturn in the oil industry in North Dakota.

    Meet Joe. He’s worked manual labor his entire life, and has always taken an honest, hardworking approach to jobs. He’s got some debt, including a truck payment and credit card debt, and wants to find a way to increase his earning potential. He keeps hearing that the economy in North Dakota is booming and that there are plenty of jobs for people with his skills and experience. Best of all, he hears that those jobs pay very well. So one day in May 2012, Joe packs everything he needs in his truck, and he hits the road to North Dakota.

    The Best Paying Job He’d Ever Had

    Even though Joe knew that going to the Bakken Formation would mean a hard life as an oil worker, moving to North Dakota turned out to be the easiest decision he ever made. In fact, despite having to live in his truck in the Wal-Mart parking lot for months on end, he truly believed his job in the Bakken oil fields was the opportunity of a lifetime. He was proud of the work he was doing and it turned out that his new job was paid him more than any other work he’d done before.

    More Opportunity, But Also More Taxes

    For Joe, a bigger paycheck meant he could finally pay off his truck and credit card debt – but it also meant he had to pay more in taxes.

    Because Joe was hired an independent contractor, which is common in the oil and gas industry, he was responsible for covering his own costs of doing business, including his taxes. So, unlike most workers who have their taxes automatically taken out of their paychecks, Joe had to pay his estimated taxes all on his own.

    No matter how much Joe would have liked to avoid these tax payments, there was simply no way around them. The IRS had been provided a copy of every single one of his 1099s – the forms that report his income as an independent contractor – and they could easily match these forms against his tax returns and determine if he wasn’t paying his full share.

    However, despite his large tax bill, Joe still enjoyed a relatively comfortable life as his well-paying job allowed him to eventually cover his tax debt without too much hassle.

    Nothing Lasts Forever

    Unfortunately for Joe, the good times eventually came to an end. As oil prices began to drop, many oil companies quickly discovered they could no longer afford to operate their rigs, meaning they had no choice but to shut things down and let their workers go, including Joe. Although he survived the first round of cuts, he was eventually let go in early 2016.

    In fact, according to the North Dakota Department of Mineral Resources (DMR), only 25 oil rigs remained active as of May 23, 2016 – compared to 211 on the same day in 2012, the year Joe arrived.

    The truth is that Joe never planned for this downturn. He simply couldn’t afford to save any money given his expenses and past tax bills. Now without a job, Joe has no way of paying the taxes on the income he has already earned.

    And even though Joe has no idea of what he is going to do next, one thing is certain: the taxman will come knocking sooner or later.

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