I started a business, and an angel investor helped with some startup expenses—one of which was biweekly “income” to myself. The investor is no longer involved. I received a 1099 for the income portion. Can they do that? Do I have to pay taxes on that “income?”
If you received income for services, it is appropriate to be issued a 1099 from the payer and you are responsible for reporting that on your income tax returns. If the 1099 is for nonemployee compensation, this is reportable on Schedule C. You can offset this income with any expenses incurred to produce this income.
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Answered by: Paul K. Rudoy, CPA, PFS, is managing partner of H2R CPA in Pittsburgh, Pa.