Utah Contractor Practice Exam

Who would receive a 1099 form from an employer?

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 1099 form, specifically the 1099-MISC or 1099-NEC, is primarily used to report payments made to nonemployees. The correct answer is focused on those individuals who are not considered employees of the company but who provided services and were compensated for it. If a nonemployee is paid at least $600 for services rendered during the year, the employer is required to issue a 1099 form to report that income to the IRS. This is essential for tax purposes, ensuring that the individual reports this income on their tax return. In contrast, the other options pertain to employees, who typically receive a W-2 form instead. This form summarizes wages earned and taxes withheld. Employees currently working or not working for the employer would not receive a 1099 form, as they fall under the W-2 reporting requirements. Meanwhile, issuing a 1099 to any nonemployee, regardless of the payment amount, does not align with IRS regulations, which specify the $600 threshold for reporting.