Utah Contractor Practice Exam 2025 - Free Contractor License Practice Questions and Study Guide

Question: 1 / 770

What document is essential for independent contractors to demonstrate their taxation status?

W-2 form

1099 form

The 1099 form is essential for independent contractors to demonstrate their taxation status because it is specifically designed for reporting income earned by self-employed individuals or independent contractors. When a business pays an independent contractor $600 or more in a calendar year, it is required to issue a 1099 form to both the IRS and the contractor. This document provides evidence of the earnings the contractor has made and is crucial for declaring income when filing taxes.

In contrast, a W-2 form is used for reporting wages paid to employees, not independent contractors. An invoice, while useful for requesting payment or documenting services rendered, does not serve as a formal tax reporting document. Lastly, a business license might be necessary for operating legally in a specific area, but it does not directly indicate how a contractor is taxed or their taxation status.

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Invoice

Business license

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