What Is the Penalty for Not Issuing a 1099?

The penalty for not issuing a 1099 starts at $60 per form and climbs to $340 per form the longer you wait, and it applies twice on every form: once for failing to file with the IRS and once for failing to send the recipient their copy.¹ A business that ignores both obligations on a single 1099 can owe up to $680 for that one form. If the IRS decides you skipped the requirement on purpose, the annual caps disappear entirely and the minimum jumps to $680 per form or 10 percent of the amount you should have reported, whichever is greater.

How the Late-Filing Penalty Works

Federal law under 26 U.S.C. § 6721 sets a graduated per-form penalty that gets worse the longer the return sits unfiled.² For returns due in 2026, the per-form charges are:¹

Filed within 30 days of the deadline: $60 per return
Filed more than 30 days late but by August 1: $130 per return
Filed after August 1 or never filed: $340 per return

The math scales quickly. A company that owed 100 forms and never files faces $34,000 from this provision alone. The same schedule applies to every type of 1099, so a landlord who never issued a 1099-MISC for $15,000 in rent faces the same per-form penalty as a business that skipped a 1099-NEC for a $2,500 contractor payment.

The Second Penalty for the Recipient’s Copy

Sending the form to the IRS is only half the obligation. A separate provision under 26 U.S.C. § 6722 requires you to furnish a copy to the payee, and the penalty for missing that step mirrors the filing penalty: $60, $130, or $340 per form depending on how late you are.³

Because these are independent obligations, a business that misses both deadlines on the same 1099 gets hit with both penalties. One neglected form, more than 30 days past August 1, costs $680. This is the piece that surprises most small business owners. They assume one form means one penalty, but the IRS sees two separate failures.

An approved filing extension does not help here. It only extends your deadline to file with the IRS. The January 31 deadline for getting the copy to the recipient stays where it is.⁴

Annual Caps

Total per-year exposure is capped, and the cap depends on business size. Businesses with average annual gross receipts above $5 million over the three most recent tax years face these maximums:⁵

Corrected within 30 days: $698,500 maximum
Corrected by August 1: $2,095,500 maximum
After August 1 or never filed: $4,191,500 maximum

Businesses with average gross receipts of $5 million or less get lower caps:²

Corrected within 30 days: $244,500 maximum
Corrected by August 1: $698,500 maximum
After August 1 or never filed: $1,397,000 maximum

The identical cap schedule applies again to the recipient-copy penalty under § 6722, so the true annual ceiling for a business that misses both obligations is double these numbers. The gross receipts test uses a three-year average, so a single strong revenue year won’t bump you into the higher tier. These amounts adjust for inflation each year.⁵

When the Caps Disappear: Intentional Disregard

If the IRS concludes that you deliberately ignored the filing requirement, the rules change. The annual caps go away entirely, and the minimum penalty per form jumps to $680 or 10 percent of the total amount you were supposed to report, whichever is greater.¹²

The 10 percent piece is what makes intentional disregard so expensive. If you failed to report $500,000 in contractor payments because you decided 1099s weren’t worth the hassle, the penalty on those forms alone reaches $50,000, with no ceiling to stop it.

The distinction between “I forgot” and “I chose not to” is what the IRS evaluates, and the agency looks at prior-year compliance history when making that call. A pattern of non-compliance or continuing to ignore IRS notices about missing returns is the kind of evidence that pushes the situation into intentional disregard territory. Businesses that have been notified of missing returns and still don’t file are especially vulnerable.

Wrong Information Can Trigger the Same Penalty

Filing a 1099 with significant errors is treated the same as not filing. A wrong dollar amount, an incorrect or missing Taxpayer Identification Number, or a misspelled payee name that prevents the IRS from matching the form to a return can all trigger the graduated $60 to $340 penalty.²

Small dollar errors are protected by a de minimis safe harbor. If the difference between the reported and correct amount is $100 or less (or $25 or less for tax withholding), the IRS won’t penalize the error.⁶ A payee can opt out of the safe harbor by requesting a corrected form, but the filer still avoids the penalty as long as the original error fell within the threshold.

For larger errors, filing a corrected return before the IRS catches the mistake still runs through the graduated tiers. Fixing it within 30 days costs $60 per form rather than $340.

Criminal Exposure in Extreme Cases

Failing to file 1099s can become a criminal matter in unusual circumstances. Under 26 U.S.C. § 7203, willfully failing to supply required tax information is a misdemeanor punishable by a fine of up to $25,000 for individuals or $100,000 for corporations, plus up to one year in prison.⁷

Criminal prosecution requires the government to prove you voluntarily and intentionally violated a legal duty you knew about. Sloppy bookkeeping or an honest mistake won’t meet that standard. The IRS reserves criminal referrals for situations that look like systematic evasion: paying workers in cash to hide the paper trail, destroying records, or running a deliberate scheme to underreport payments.

How to Reduce What You Owe

Several paths can lower or eliminate the penalty, but each has specific requirements.

File Now Rather Than Later

Speed is the biggest lever. Filing within 30 days of the deadline drops the per-form penalty from $340 to $60. Getting it done before August 1 costs $130.¹ Discovering a missed batch in mid-February and filing immediately can save more than 80 percent of what the penalty would otherwise be.

Request an Extension Before the Deadline

Form 8809 requests an automatic 30-day extension for most 1099 types, provided you submit it before the original due date. The extension for 1099-MISC is automatic and needs no reason. Extensions for 1099-NEC are not automatic. You must submit a paper Form 8809 with a written explanation, and the IRS has to approve it.⁴ An approved extension prevents late-filing penalties during the extension period but doesn’t change the recipient-copy deadline.

Ask for a Reasonable Cause Waiver

The IRS can waive the penalty entirely if you show reasonable cause. That means either significant mitigating factors or events beyond your control, and in both cases proof that you acted responsibly before and after the problem.⁸ Mitigating factors include being a first-time filer for that form type or having a strong compliance history. Events beyond your control might include destruction of business records or a vendor failing to provide data despite repeated requests.

Forgetting or being too busy doesn’t qualify. The IRS looks at what you did to meet the deadline and what you did to fix the problem once you found it. One quirk worth knowing: the First Time Abate program, which waives penalties on many other IRS filings, does not apply to information return penalties like 1099s.⁹ A reasonable cause request is the only administrative route to a full waiver.

1
Internal Revenue Service. Information Return Penalties
2
Office of the Law Revision Counsel. 26 USC 6721 Failure to File Correct Information Returns
3
Office of the Law Revision Counsel. 26 USC 6722 Failure to Furnish Correct Payee Statements
4
Internal Revenue Service. Form 8809 Application for Extension of Time To File Information Returns
5
Internal Revenue Service. Rev Proc 2025-32
6
Federal Register. De Minimis Error Safe Harbor Exceptions to Penalties for Failure To File Correct Information Returns or Furnish Correct Payee Statements
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Office of the Law Revision Counsel. 26 USC 7203 Willful Failure to File Return, Supply Information, or Pay Tax
8
eCFR. 26 CFR 301.6724-1 Reasonable Cause
9
Internal Revenue Service. Administrative Penalty Relief