Question

When must payments made by a business to non-corporate independent contractors for services rendered be reported to the IRS?

A. Payments exceed $1,000 for the calendar year
B. Payments exceed $600 in the last 12 months
C. Payments exceed $600 for the calendar year
D. Payments exceed $1,500 for the calendar year

Answer 1

Businesses must report to the IRS C) payments exceeding $600 for the calendar year to non-corporate independent contractors via a 1099-NEC form. Independent contractors in the gig economy are responsible for both employee and employer sides of payroll taxes.

Step-by-step explanation:

Payments made by a business to non-corporate independent contractors for services rendered must be reported to the IRS when the payments exceed $600 for the calendar year. Therefore, the correct answer to the question is C. Payments exceed $600 for the calendar year.

As part of the tax reporting requirements, businesses must file a form called a 1099-NEC for each person to whom they have paid during the year who is not an employee.

For independent contractors in the gig economy, it's important to note that they are responsible for both the employee and employer portions of payroll taxes, which include Social Security and Medicare taxes.