A general contractor hires 3 independent contractors for a project. Contractor A receives $15,000, Contractor B receives $450, and Contractor C receives $850. How many Form 1099-NEC forms must be issued?
Correct Answer
A) 2 forms
Form 1099-NEC must be issued to independent contractors who receive $600 or more. Contractor A ($15,000) and Contractor C ($850) meet this threshold, while Contractor B ($450) does not.
Why This Is the Correct Answer
Form 1099-NEC must be issued to independent contractors who receive $600 or more in a tax year. Contractor A received $15,000 (well above the threshold) and Contractor C received $850 (above the $600 threshold), so both require 1099-NEC forms. Contractor B received only $450, which is below the $600 threshold, so no form is required. Therefore, 2 forms total must be issued.
Why the Other Options Are Wrong
Option B: 1 form
This is incorrect because two contractors (A and C) received payments of $600 or more, which requires issuing 1099-NEC forms. You cannot issue zero forms when contractors meet the threshold.
Option C: 0 forms
This is incorrect because Contractor B received only $450, which is below the $600 threshold for 1099-NEC filing. Only contractors receiving $600 or more require the form, so only 2 forms are needed, not 3.
Memory Technique
Remember 'Six Hundred or SIX-ty percent more' - if the payment is $600 or higher, you must file. Think 'SIX hundred = SIX-teen hundred = SIX thousand' - all need forms.
Reference Hint
IRS Publication 15 (Circular E) or Florida Construction Industry Reference Manual - Tax Reporting Requirements section
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