Founder’s checklist for preparing 1099s

For specific guidance on your tax filing obligations, please consult with a qualified tax professional. Mercury does not provide tax advice. Tax regulations can be complex and vary based on individual circumstances, so it's important to seek personalized advice from an expert who can assess your unique situation.

If your business has paid freelancers, contractors, or vendors this year, preparing 1099 forms is one tax task you don’t want to overlook. With closing the books and planning for growth competing for your attention, it’s easy for 1099 prep to fall off the radar. However, missing or incorrectly preparing your 1099 forms can lead to IRS penalties and unnecessary stress.

This 1099 checklist is your easy-to-follow, calendar-driven guide, focused specifically on the steps for your 1099-NEC and 1099-MISC forms. It breaks down the overwhelming 1099 process into six manageable steps. We show you what to do and when — helping you meet deadlines, avoid penalties, and build repeatable systems that make future tax seasons smoother.

If you’re looking to stay tax compliant, avoid penalties, and understand 1099 filing requirements, you’re in the right place. Whether you’ve hired just one contractor or have a full roster of freelancers, you’ll learn what information you need to gather, how to verify key details, and when to file your forms.

Need a basic overview of 1099s? Check out this founder’s guide to 1099 filing.

If you paid someone more than $600 this year and they’re not an employee — think freelancer, contractor, or vendor — you’ll need to file a 1099-NEC form for them. Before you file, make sure you have all of the details to meet 1099 filing requirements. This includes W9 forms, contractor information, and payment records.

Checklist 

• Collect W-9 before issuing first payment: Ask every contractor you work with to complete and return an IRS Form W-9. Make W-9 collection part of your vendor onboarding process — it's much easier to get this upfront than chase it down in December.. If you don’t ask for it then, aim to at least have it by year-end. The form — which should not only be filled out, but signed — includes the contractor’s legal name, business name (if applicable), address, and taxpayer identification number (TIN or SSN). Store it somewhere secure — like Mercury — because you’ll need it when you prepare 1099 forms. 
• Gather contractor details: Create and house a centralized record — often in accounting software, a spreadsheet, or Mercury dashboard — that contains contractor details like full legal name, mailing address, email, and phone number. You’ll also need to know the contractor’s business type, as corporations are generally exempt from 1099s. 
• Pull together payment records: Gather payment history and tax information (e.g. W-9, TIN, etc.) for each contractor from your bookkeeping or accounting system. You’ll also need to know how you made each payment, as that will determine the way those payments are reported (see step 2!). 

Now it’s time to figure out who actually needs a 1099 form. Not every payment qualifies, and the rules can vary depending on how you paid and what kind of work was done. Reviewing payment types and amounts now ensures you only file the forms that apply, so you can avoid unnecessary corrections later.

Checklist

• Determine who qualifies for each form: There are two types of 1099 forms you should pay special attention to: Form 1099-NEC and Form 1099-MISC. Form 1099-NEC is for non-employee compensation, such as freelancers who perform a service for your business. Form 1099-MISC is for miscellaneous payments, such as rent, royalties, prizes, or healthcare payments. 
• Track and categorize your payments: If you paid a freelancer or contractor $600 or more for services via check, ACH, cash, or even credit card, you may need to file a 1099-NEC. If you paid through PayPal, Venmo Business, or Stripe's commercial payment features, those platforms report the payments via Form 1099-K — you don't need to file a separate 1099-NEC.
• Check common edge cases: Attorney fees of $600 or more require Form 1099-NEC, regardless of whether the law firm is incorporated. Additionally, if you paid settlements or judgments through an attorney, those gross proceeds require Form 1099-MISC Box 10.. For vendors that sell physical goods only — think supplies, equipment, or materials — you typically will not need a 1099 form. If a vendor has sold you both goods and services, you only need to report the service portion.

Next, make sure to verify that all the information you have is correct and start preparing the 1099 forms. Keep in mind that even a small error can lead to rejected filings, so it’s best to do your due diligence.

Checklist

• Double check EINs and addresses: Ensure you have correct Employer Identification Number (EIN) or TIN/SSN details from each contractor. Confirm mailing addresses, email, and overall contact information as well. The information should match what is on the contractor’s W-9 form. 
• Confirm payment totals: Review your bookkeeping records and bank statements to make sure you’ve got the correct payment totals, and that you’re including only eligible payments.
• Ensure you’re using the correct form: Be careful not to mix up Form 1099-NEC (which is for services) and Form 1099-MISC (which is for miscellaneous payments).

By the 1099 filing deadline, you must also deliver copies of the 1099 forms to your freelancers, contractors, and vendors. Some businesses choose to complete this step prior to filing with the IRS so that the freelancers, contractors, and vendors can confirm their information, while others do it at the same time as filing. Either way, all freelancers, contractors, and vendors must receive their 1099s no later than January 31 (or the next business day).

Checklist 

• Avoid IRS penalties: If you don’t send 1099s to freelancers, contractors, and vendors on time, you could face potential financial penalties as outlined below:
• $60 if filed within 30 days
• $130 if filed 31 days to August 1
• $330 if filed after August 1 or not filed
• $660 for intentional disregard

Determine the best delivery method: You can send out 1099s by mail, electronically, or through your filing service (such as your tax filing software or Mercury).

The next step on the 1099 checklist is filing the forms with the IRS and state entities. Be aware of these important deadlines: 

• 1099-NEC forms: Both IRS filing and recipient copies must be delivered by January 31 (or the next business day if it falls on a weekend — February 2 in 2026).
• 1099-MISC forms: The deadline is February 28 for paper filings and March 31 for electronic filings. 

Note that if a deadline falls on a weekend or holiday, the due date is the next business day. In 2026, January 31 falls on a Saturday, so the deadline will be February 2, 2026.

Checklist

• Determine the rules for your state: Some states are part of federal/state filing programs, while others have separate filing requirements and thresholds. As of 2025, there are 32 jurisdictions that participate in Combined Federal/State Filing (CF/SF) program. Some states (like California) have different thresholds ($600 vs. federal); states with no income tax don't require 1099s.
• Choose electronic or paper filing: Electronic filing is fast and secure, and you have to use this option if you’re filing more than 10 forms. Paper filing is slower and may be error prone. You must use the required red-ink 1099 forms if you’re going the paper route.
• Decide on an electronic filing system: The IRS FIRE (Filing Information Returns Electronically) is the official tool for submitting 1099s. You can also use the IRS Information Returns Intake System (IRIS e-file) tool. Alternatively, you can file directly via software platforms, including Mercury.

Once you’ve submitted the 1099 forms, it’s time to set yourself up for success for the next tax year. Founders and small business owners who treat tax season as a cycle rather than a last-minute scramble have intelligent systems in place that help them automate most of the process every year.

Checklist

• Automate W-9 collection: Use automation tools or accounting software to collect and store W-9s. With Mercury, you can collect W-9s from recipients and keep these forms organized in the Taxes tab on your dashboard. 
• Keep your books clean: Categorize payments to freelancers, contractors, and vendors as they happen, tagging which transactions are likely to require 1099-NEC and 1099-MISC forms. This will save you hours come January. Review these numbers on a monthly or quarterly basis so you can spot and course-correct any recordkeeping issues. 
• Use modern financial software to support tax prep: Tools like Mercury offer built-in support for 1099 tax filing, helping you simplify tax prep throughout the year. Within your Mercury dashboard, we can autopopulate 1099s using W9 information and submit directly to the IRS

Filing requirements can be complex, which can lead to common misconceptions about 1099 forms. It’s important to stay up to date on the details so you don’t run into common pitfalls. Spending time carefully preparing your forms can save you hours later on, should an issue arise. 

• Filing late: If you file late, you could be looking at several hundred dollars in fines for each late form. Avoid this by starting the process in December and using tools like Mercury to automate crucial steps. 
• Missing vendors or contractors: If you haven’t done your due diligence, you may forget a vendor or contractor. Be sure to track all payments over $600 and cross-check with your W-9 list to catch anyone you may have missed. 
• Misclassifying contractors: Don’t accidentally classify an employee as an independent contractor. Be sure to use the IRS’s guidelines to determine how to classify the people you work with. 
• Racking up extra fees: If you’ve made an error with your 1099 filing and need to resubmit it, you may be charged additional fees by some platforms. With Mercury, you can resubmit your 1099 filing for free.

Preparing your company’s taxes can be stressful, and 1099 forms are a big part of that.. But if you can get ahead of the necessary steps with this checklist and start your preparation in December, you’ll be set up for success come January. 

And with Mercury, we can help take care of much of that administrative work for you by identifying eligibility, collecting and populating tax documents, and filing all from one place. We can help you get ahead of these tasks so you’re not overwhelmed during tax season.

For another refresher on filing 1099s and how Mercury can help, read this guide or our help center article.