Registered Tax Return Preparer RTRP Practice Exam

An independent contractor's income is reported using Form 1099-NEC. This form specifically caters to reporting non-employee compensation, which is the type of income typically earned by independent contractors. When a business pays an independent contractor $600 or more in a calendar year for services rendered, it is required to issue a Form 1099-NEC to report this payment to both the contractor and the IRS.

In contrast, Form 1040 is the individual income tax return used by taxpayers to report their overall income, but it doesn’t specifically address the reporting of independent contractor income itself. Schedule C (Form 1040) is often used by independent contractors to report their profits or losses from their business, but it is derived from the information reported on Form 1099-NEC, not a direct reporting mechanism itself. Form W-2 is for employees and is used by employers to report wages paid to employees, which does not apply to independent contractors. Thus, Form 1099-NEC is the correct form that directly addresses the requirement to report income for independent contractors.