If your startup hired anyone outside payroll and paid them $600 or more in 2024, you’re probably required to file a 1099-NEC.
Miss the deadline? The IRS won’t just forget, penalties stack up fast.
This guide breaks down who needs a 1099-NEC, how to file it, and how to avoid the usual founder mistakes.
The 1099-NEC (Non-Employee Compensation) is an IRS form that reports payments to independent contractors.
It’s the IRS’s way of making sure people you paid (who aren’t employees) report their income.
For you as a startup, it’s a compliance requirement, even if you didn’t make revenue.
You must issue a 1099-NEC if:
You paid an individual, LLC, or partnership $600+ in a year
They provided services to your startup (not just products)
You paid them by cash, check, ACH, Zelle, crypto, etc.
A freelance developer building your MVP
A marketing consultant you hired for ads
A designer who invoiced you directly
Contractors paid via platforms like Upwork/Fiverr (platform reports instead)
Vendors that are C-Corps or S-Corps (except attorneys, they always require reporting)
Your employees (they get W-2s)
🗓️ Deadline: January 31
By this date, you must:
Send Copy B to the contractor
File Copy A with the IRS (e-file or paper)
Miss it, and penalties start at $60 per form and can reach $310 per form.
Collect W-9 Forms Early
Get a W-9 from every contractor before paying them.
Track All Payments
Keep a record of who you paid and how much.
Generate the 1099-NEC
Use IRS-approved e-file tools (Track1099, Gusto, TaxBandits).
Send Copies
Copy B → contractor
Copy A → IRS
Keep Copy C for your records
File State Requirements (if any)
Some states require separate filings — check your state rules.
| ❌ Mistake | ⚠️ Why It’s a Problem |
|---|---|
| Not collecting W-9 upfront | Can’t file without correct info |
| Paying via Zelle/ACH and forgetting | Still reportable |
| Ignoring attorney payments | Always need a 1099 |
| Filing late | Penalties stack up fast |
The good news:
Payments reported on 1099-NEC are deductible expenses for your startup.
Clean 1099 reporting = fewer audit risks when you file Form 1120.
Filing 1099s shouldn’t eat into your runway.
TaxHero AI keeps you on track by:
Tracking which contractors need 1099s
Reminding you before deadlines hit
Organizing W-9s and generating IRS-ready reports
| Task | Deadline |
|---|---|
| Collect W-9s | Before first payment |
| Track payments | All year |
| File 1099-NEC with IRS + send to contractor | January 31, 2025 |
| Keep records | 4 years |
1099-NEC filings might seem small, but missing them can lead to big penalties.
Collect W-9s, track payments, file on time, and let TaxHero AI handle the chaos so you don’t have to.
With AI-powered bookkeeping and tax filing, you stay focused on what matters: building your startup.
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