Must I pay taxes on income I received from an angel investor in my business?

by Paul K. Rudoy, CPA, PFS | Feb 27, 2018

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.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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