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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29535
Experience:  Taxes, Immigration, Labor Relations
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My start up company issued promissory notes to investors

Customer Question

My start up company issued promissory notes to investors while trying to raise our round B. The notes accrue interest at a rate of 8% annually and will mature and be converted to series B stock when the round closes (when a large investor is secured). Assuming this crosses 2 years, can we issue 1099s for the accrued interest in one lump sum at conversion?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

the accrued interest must be reported annually in your situation.
Neither your company nor investor may not defer that till conversion.

But at conversion - you will report the accrued interest from Jan 1 till the date.

Customer: replied 1 year ago.
if we did not report interest for the first year, can we report the total interest in year 2?
Expert:  Lev replied 1 year ago.

If by mistake interest income (and deduction) was not reported - you woudl need to amend the tax return for that year and correct that mistake.

Expert:  Lev replied 1 year ago.

If by mistake interest income (and deduction) was not reported - you woudl need to amend the tax return for that year and correct that mistake.
We may not just decide when to report income or deduction.

Sorry if you expected differently.

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