A founder's guide to 1099 filing

January means it’s time for founders to organize their books, gather their paperwork, and prepare for tax season. And if you work with contractors, freelancers, or certain other external vendors, you may be required to file and send them 1099 forms. But if you haven’t done it before, navigating 1099 filing can raise a lot of questions. Who qualifies for these forms? How do you collect the necessary information? When should you file 1099s?

In this article, we’ll walk you through the essentials of preparing these filings, show you how to request and handle W-9s, offer a few insights on how to request and handle W-9s with Mercury, and share how you can easily parse and download tax document data to prep your 1099 filing.

Note: 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.

What is a 1099?

A 1099 is an IRS tax form used to report various  income sources other than your regular employment wages — from dividends to interest income, retirement distributions to real estate proceeds.

While multiple kinds of 1099 forms are used for various purposes, founders most likely need to consider the filing requirements for the 1099-NEC (nonemployee compensation).

Companies must file one copy of a 1099-NEC with the IRS and send a second copy to the contractor as a way to report payments made to non-employees.

Who needs a 1099?

Generally, if you’ve paid $600 or more to an independent contractor, freelancer, or self-employed individual over the course of the tax year, you may need to issue a 1099-NEC to them.

Eligible recipients may include:

• Independent contractors: Have you hired freelancers, designers, or developers for services this year?
• Vendors and service providers: Have you made payments to unincorporated vendors for their work?

If you’re thinking, “That’s a lot of 1099s to send!” — you’re right that it might be. But there are a couple of important things to keep in mind:

• Only payees taxed as a sole proprietorship, partnership, or single-member LLC are eligible to receive a 1099-NEC. Vendors that are taxed as a C Corporation or S Corporation are typically not subject to being issued a 1099. (There may be some exceptions such as in the case of attorneys — do your diligence.) It’s not unlikely that the bulk of the software you pay for, for example, is from incorporated companies, and therefore may not be subject to a 1099 from you.)
• Second, you only need to send a 1099 to a vendor that you pay by cash, check, ACH, or wire transfer. If you pay a service provider through a payment settlement entity (PSE) like Stripe (which many agencies, SaaS products, and other services are paid through), PayPal, Square, Venmo, or even with a credit card, it’s the PSE’s responsibility to issue the contractor their 1099 (in that case, typically a 1099-K), not yours.

How to collect information to file your 1099s

Now that you know which vendors require a 1099 to be filed, how do you collect the information necessary to fill out a 1099?

To make sure you have the right information when it’s time to file your 1099s, you’ll typically need a W-9 form from your U.S.-based contractors (or a W-8 BEN for certain foreign contractors, though that’s a bit trickier and depends on specific IRS rules).

• W-9: Collects the taxpayer identification number (TIN) of a U.S. vendor or contractor. This TIN is essential for 1099 filings.
• W-8 BEN: Applies to foreign individuals/contractors. (If you’re a Mercury customer, keep in mind that we’re only able to parse W-9s at this time.)

Typically, collecting these forms is done in one of two ways:

1. A company requests that the vendor sends a copy of their completed W-9  form over — usually via email or a secure upload provider
2. A company sends a blank W-9 to a vendor with a digital request to fill in the necessary information

Without specialized and secure tooling, requesting W-9s from contractors can be a bit of a hassle — sending individual emails, chasing down forms, and manually re-entering data. Still, you’ve got to do what it takes to get the work done.

This is where Mercury can help.

How to request tax documents and prepare your 1099 filing with Mercury

If you’re a first-time founder who hasn’t had to request W-9s and file 1099s before, you’re not alone. Using Mercury to assist with preparing your 1099s can help save time and reduce errors when collecting and preparing tax document information. This can helps you:

1. Send W-9 requests: Request W-9s from single or multiple recipients (e.g. contractors or vendors) in just a few clicks.
2. Parse W-9 data: Once a vendor uploads their W-9, Mercury extracts their TIN and other essential information.
3. Generate bulk exports: Download all recipient W-9 data at once, in a convenient spreadsheet or CSV format.
4. Ease your filing process: You can then take that data and import it into your preferred IRS 1099 filing software (for example, QuickBooks Online or other third-party solutions).

If you already have your W-9s, you can easily upload them directly to each recipient profile in Mercury. (You can still download any data into a spreadsheet afterward.) Learn more about this in our Help Center.

Because everything — banking, spend management, invoicing, and payments — lives under the Mercury umbrella, gathering tax documents is simpler, faster, and more accurate. By going this route rather than the manual approach of years past, you no longer have to switch between a dozen platforms or chase details by email.

FAQs about 1099 filing

1. Do I need to issue a 1099 to myself if I’m both a founder and a contractor?

• Generally, no. Paying yourself as a founder does not typically fall under contractor payments, but there are situations where a founder might be set up as a separate entity. Always speak to your tax professional for advice.

2. What about foreign contractors?

• Foreign contractors often provide a W-8 BEN form instead of a W-9. (Note that you can request or upload any tax documents — W-9 or W-8 BENs — using Mercury, but Mercury can only help parse W-9 data at this time.)
• If you’re paying international freelancers, you’ll want to consult tax regulations specific to foreign payments.

3. Can I automatically file my 1099s through Mercury?

• Not yet. We’re focusing on 1099 prep — collecting, parsing, and exporting the critical data you’ll need to file. You’ll need to use third-party software or an accountant to finalize and submit your 1099s to the IRS. Tools like QuickBooks Online can help.

4. When is the best time to request W-9 information from contractors?

• Generally, a good practice is to do this as early as possible — you might consider requesting this information during the contractor’s initial onboarding at your company. (Mercury customers can simply check a box to collect tax forms as they onboard recipients!) But if you’re working with vendors and haven’t yet requested their W-9, get your process started ASAP to ensure you meet filing deadlines.

5. What happens if a contractor refuses to provide their W-9 information?

• If a contractor refuses to provide their W-9 information, the payee is subject to 24% backup withholding that you would send to the IRS.

6. What’s the deadline to file 1099s?

• Companies are required to send each contractor one copy of their 1099-NEC and file the other copy with the IRS no later than January 31, 2025.

Wrapping up

By understanding who requires a 1099 and how to collect essential information from your vendors, you can navigate this part of tax season with confidence. With Mercury, you can easily request and organize W-9 data, making it much more manageable — no need to send one-off emails or manually transfer vendor information.

Most importantly, please always first consult with a tax professional when you have questions unique to your business. Whether you’re a brand-new startup or an established business, we hope these tips can help you tackle your 1099 filing this year with less stress and more clarity