Utah Contractor Practice Exam

To whom would an employer issue a 1099 form?

1. An employee who is currently working for the employer

2. An employee who is not currently working

3. A nonemployee who was paid at least $600 for services during the year

4. Any nonemployee regardless of the amount paid for services

The correct answer is: A nonemployee who was paid at least $600 for services during the year

The issuance of a 1099 form is specifically designed to report income paid to nonemployees for services they provided during the year. A key requirement for receiving a 1099 form is that the amount paid for services must be at least $600. This requirement helps ensure that the IRS is informed of significant income that needs to be reported for tax purposes. Employers are typically obligated to issue a W-2 form to employees to report wages, tips, and other compensation paid to them. Conversely, independent contractors or freelance workers who are not classified as employees fall under the 1099 category. Therefore, the correct context for using a 1099 form applies to nonemployees who meet the specific payment threshold, reflecting their earnings made through contract work or services rendered. In contrast, issuing a 1099 to an employee—whether currently working or not—would not align with IRS regulations, as employees receive a different type of tax report. Thus, the focus on nonemployees, particularly those compensated above a certain level, accurately captures the intent behind the 1099 form.