The Correct Answer and Explanation is:
Based on the options provided in the image, the correct answer is A corporation.
Here is a detailed explanation:
In the United States tax system, the responsibility for preparing and filing a Form 1099 falls to the payer, which is the entity that made the payment. A corporation that hires an independent contractor or freelancer for services is a common example of a payer.
The most relevant form in this situation is the Form 1099-NEC, which stands for Nonemployee Compensation. If a business or corporation pays an independent contractor $600 or more for services during a calendar year, that business is legally obligated to fill out a Form 1099-NEC. The corporation completes the form, detailing the total amount paid to the contractor. It then must send one copy to the contractor and file another copy with the Internal Revenue Service (IRS). This process serves as an official record of the income for both the government and the recipient, ensuring that the income is properly reported for tax purposes.
Let’s clarify why the other options are incorrect. An employee does not deal with 1099 forms for their primary wages. Instead, employees receive a Form W-2 from their employer. The W-2 reports the employee’s annual wages and the amount of taxes withheld by the employer, which is a fundamental difference from an independent contractor relationship where no taxes are withheld by the payer.
A freelancer is the recipient of the Form 1099-NEC, not the one who prepares it in this scenario. The freelancer, or independent contractor, uses the information provided on the 1099 form they receive from the corporation to accurately report their self employment income on their own tax return, typically on a Schedule C. The duty to create and issue the form rests with the client that paid for the services, not the freelancer who performed them.
