what happens if you don't file a 1099
If you don’t file a required 1099 (or don’t report income shown on a 1099), the IRS generally catches it and can charge penalties, interest, and in serious cases treat it as tax evasion.
Quick Scoop: What happens if you don’t file a 1099?
Two different “not filing” situations
- You’re the business / payer and don’t file or send 1099s
- The IRS can charge per‑form penalties when you:
- Don’t file by the deadline
- File very late
- Don’t furnish a correct copy to the payee
- For recent years, typical penalty ranges look like:
- Filed a bit late (within ~30 days): around $60 per form.
- The IRS can charge per‑form penalties when you:
* Filed later (after 30 days but before August 1): around **$110–$130 per form**.
* Filed after August 1 or not at all: about **$270–$340 per form** or more.
* There are **annual maximums** for small and large businesses, but they’re still big numbers (up into hundreds of thousands of dollars for many late forms).
- You’re the freelancer / contractor and don’t report 1099 income
- The company that paid you sends a 1099 to the IRS and to you. The IRS’s computers match those forms to what you put on your tax return.
* If you leave that income off your return (or never file a return):
* The IRS usually sends a **notice** (often a CP2000) saying, “You missed this income; here’s what we think you owe”.
* They recalculate your tax bill assuming the unreported income is fully taxable and then add **penalties and interest** from the original due date.
* Repeated or deliberate non‑reporting can be treated as **intentional disregard** or even **criminal tax evasion** , which comes with much harsher consequences.
Penalties for businesses that don’t file 1099s
Here’s a simplified view (exact amounts change slightly by year, but the pattern stays similar):
| When you file (or fail to file) | Typical penalty per form | Key notes |
|---|---|---|
| Within ~30 days of deadline | ≈ $50–$60 per form | [4][3][7]Penalty is lowest if you fix it quickly. |
| After 30 days, by Aug 1 | ≈ $110–$130 per form | [3][7]Penalty increases as time passes. |
| After Aug 1 or never filed | ≈ $270–$340 per form | [7][3]Highest “standard” penalty tier. |
| Intentional disregard | Minimum ≈ $540–$680 per form or about 10% of income, no max | [4][3][7]Used when the IRS believes you knowingly ignored the rules. |
- These penalties can apply separately for:
- Not filing with the IRS, and
- Not giving the payee their copy.
- In audits, the IRS can also disallow your deductions tied to payments that should have had 1099s, which effectively increases your taxable income.
A quick mini‑story (business side)
Imagine you run a small design agency and pay three contractors $2,000 each in 2025 but never send 1099‑NEC forms. A year or two later, the IRS notices missing information returns. You could face hundreds of dollars in per‑form penalties, plus the risk that your deduction for those payments gets questioned in an audit. That means you not only pay penalties, but your taxable profit might jump too.
What if YOU (the contractor) don’t report a 1099?
Even if you never see the paper form, the income is usually still in the IRS system. What typically happens:
- You file a return but forget the 1099
- Matching systems flag your return because the payer’s 1099 shows more income than you reported.
* You get a **letter** (such as CP2000) listing the missing 1099 and a proposed additional tax amount.
* That bill includes:
* Extra income tax
* **Failure‑to‑pay penalties** and
* **Interest** from the original due date.
- You never file a return at all
- If 1099s show income under your SSN or EIN and no return shows up, the IRS can:
- File a substitute for return (SFR) using the income they have on record.
- Assume little or no expenses, which often means you owe more than if you had filed yourself.
- If 1099s show income under your SSN or EIN and no return shows up, the IRS can:
* They then pursue the balance with notices, liens, levies, and other collection tools if it remains unpaid.
- Is it “just one missing 1099”?
- People report that a single forgotten 1099 usually results in a notice and a relatively small penalty , not a full audit, as long as you cooperate and pay or correct it.
* But patterns of not reporting income can raise the risk of deeper scrutiny and harsher treatment.
Another mini‑story (contractor side)
You drive part‑time for a delivery app and earn $3,500 that gets reported on a 1099‑NEC. You forget to add it when you file your 2025 return. Months later, a letter shows up: the IRS has added $3,500 to your income, calculated extra tax, and tacked on penalties and interest. You can either agree, pay, or respond with documentation like mileage and business expenses to lower the taxable amount.
How the IRS “knows” you didn’t file / report
- Every required 1099 that a payer files lists:
- The payer’s info
- The recipient’s SSN/EIN
- The amount paid
- That data goes into IRS systems and is automatically matched against filed tax returns.
- If there’s a mismatch:
- For payers : missing or incorrect information returns can trigger information return penalties and a notice (for example, Notice 972CG).
* For **recipients** : missing income triggers underreporter notices like **CP2000**.
So “hoping they won’t notice” is usually unrealistic; the whole 1099 system is built for exactly this cross‑check.
What you can do if you missed a 1099
If you’re reading this because you think you may have already messed up, you usually have options:
- If you’re the recipient (freelancer, contractor, investor):
- If you already filed:
- Gather the missing 1099 and your records of expenses.
- File an amended return to include the income and correct your tax before or soon after the IRS contacts you.
- If you already filed:
* If you haven’t filed yet:
* Report the income even if you never received the 1099 in the mail. You’re required to report it whether the form shows up or not.
- If you’re the payer (business, client, platform):
- File the late 1099s as soon as possible; the penalty is lower the earlier you fix it.
* If there was a reasonable cause (serious illness, disaster, etc.), you can **explain that to the IRS** ; in some cases, penalties can be reduced or waived.
- When to get professional help
- If the amounts are large, if you’ve missed multiple years, or if you suspect the IRS might view this as “intentional disregard,” it’s wise to talk to a CPA, enrolled agent, or tax attorney who can look at your specific facts and help negotiate penalties or set up payment plans.
“What happens if you don’t file a 1099?” in one line
- For businesses, skipping 1099s means per‑form penalties that grow over time and can explode if it looks intentional.
- For individuals, ignoring 1099 income brings IRS notices, extra tax, penalties, and interest , and in extreme cases, potential criminal issues.
TL;DR: If you’re required to file or report a 1099 and you don’t, expect the IRS’s matching systems to catch it sooner or later, send you a bill, and possibly add painful penalties—so it’s almost always cheaper and less stressful to fix it proactively. Information gathered from public forums or data available on the internet and portrayed here.