Want to avoid incurring a penalty for not filing 1099-NEC? The first step is to ensure every single return is filed correctly and on time. This is especially important for payers handling payments to freelancers or contractors, who need to stay on top of due dates, accuracy, and e-filing rules.
Here are some important things to know about 1099-NEC penalties for 2026, and how to stay penalty-free with e-file platforms like 1099Online.
Understanding the Basics of 1099-NEC Penalties
The IRS imposes stiff penalties for every late, incorrect, or missing Form 1099-NEC. If you fail to file a required 1099-NEC, the IRS may issue penalties under IRC §§ 6721 (which is, failure to file correct information returns) and 6722 (which is, failure to furnish correct payee statements). Additionally, filing with incorrect name/TIN details can also lead to CP2100/CP2100A notices and may trigger 24% backup withholding if a correct TIN isn’t provided by the payee after the “B-notice” process.
Failure to furnish 1099-NEC on time or correctly triggers escalating penalty tiers early corrections cost less, while intentional disregard carries the highest per-return penalty. Beyond fines, businesses also risk vendor distrust, lost deductions, and IRS scrutiny. In the past, businesses have paid five-figure penalty bills for missed filings.
To stay compliant, payers must report nonemployee compensation of $600 or more by the statutory January 31 deadline (next business day when it falls on a weekend for Tax Year 2025 filings, that’s Monday, February 2, 2026) to recipients and the IRS.
Penalties for Late Filing (2026)
Penalties increase as the delay grows. Below is the current IRS penalty structure for returns due in 2026 (TY 2025):
| Filing Status | Penalty (per form) |
| Filed ≤ 30 days late | $60 |
| Filed between 31 days and Aug 1 | $130 |
| Filed after Aug 1 or not filed | $340 |
| Intentional Disregard | $680 (no maximum) |
Note: These amounts apply under IRC §§ 6721 and 6722. Annual caps apply to most tiers, but intentional disregard has no cap.
Payers that intentionally ignore the rules for Form 1099-NEC filing can face the 1099-NEC “intentional disregard” penalty.
Four Common Compliance Failures That Trigger Penalties
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- Missing or Late IRS Copy
Once you cross the 1099-NEC deadline 2026 (statutory due date January 31; next business day is Monday, February 2, 2026), the penalty clock starts. Even one day late pushes a filer into Tier 1 penalties. - Failure to Furnish 1099-NEC to the Recipient
Furnishing late or incorrect recipient copies falls under §6722, and the same tiered dollar amounts apply per return. So, if you e-file with the IRS but do not send the recipient copy correctly or on time, you’ll be subject to the tiered penalty. - Incorrect or Missing TIN/Name Match
In case of a missing or incorrect TIN, the IRS may send a CP2100/CP2100A notice, and you must follow the B-Notice and backup withholding rules. You’ll need to begin 24% backup withholding on future reportable payments if the payee fails to provide a correct TIN within the B-Notice timelines or when required after IRS notification.
- Missing or Late IRS Copy
Note: A CP2100 notice isn’t a penalty. You’re penalized if you either file/furnish incorrect 1099s and don’t correct the mismatch or fail to begin and deposit 24% backup withholding after notice. The latter may result in you owing tax, interest, and failure-to-deposit penalties.
- Using the Wrong Filing Method
For returns needed to be filed January 1, 2024 onwards, filers of 10 or more total information returns (aggregated across types, including Forms W-2 and all Forms 1099) must e-file unless a waiver applies. If you are required to e-file but file on paper without an approved waiver, you may be subject to the penalty for failure to file electronically up to $340 per return and it applies only to the number of returns that exceed 10.
Note: Aggregating all return types is mandatory when calculating the 10-form threshold.
Platforms like 1099Online automatically aggregate the totals and ensure payers e-file correctly, thus avoiding such accidental violations.
Key Deadlines And Other Details
- IRS and Recipient Copies: Due by January 31(statutory date), but if the date falls on a weekend/holiday, the deadline is the next business day (February 2, 2026, for TY 2025).
- Correction Window: Fix errors within 30 days after the due date to stay in the lowest penalty tier ($60 per return). The same tiers apply to both filing the corrected copy with the IRS and furnishing corrected copies to recipients.
- Electronic vs. Paper Filing: You must e-file if you are filing 10 or more total information returns in the calendar year (aggregating almost all types W-2 plus all 1099 forms, etc.). If e-filing is a hardship, request a waiver on Form 8508; without the waiver, paper filing when e-filing is mandated can trigger penalties.
- State Rules: States’ rules differ many require copies only when state tax is withheld or for specific forms (e.g., 1099-K). Don’t assume federal penalties/tiers apply the same way at the state level, and instead verify each state’s instructions before filing.
(Also note that states may use IRS data-matching and issue state notices after federal mismatches or penalties; requirements and penalties vary by state. Always confirm the current state rule before filing.)
Avoiding Penalties: A Compliance Checklist
Building compliance into your workflow prevents the majority of IRS penalties for late 1099-NEC issues. Before you file, confirm that:
- You’ve collected a completed Form W-9 with the correct TIN from each contractor before their first payment. If a payee doesn’t provide a valid TIN, 24% backup withholding applies.
- You’ve run IRS TIN Matching (free via IRS e-Services or through an e-file provider like 1099Online) to validate name/TIN combinations before filing 1099Online includes this step automatically during upload.
- You’ve tracked cumulative payments to each vendor and flagged any approaching $600.
- Your e-file is submitted to the IRS by the due date (January 31, or next business day February 2, 2026, for TY 2025).
Note: Keep file status emails and associated e-file data (or the ability to reconstruct it) for at least 3 years, and keep for 4 years if federal withholding (e.g., backup withholding) was reported.
Some additional safeguards payers can include:
- Automatic deadline reminders in your e-file dashboard.
- Identifying duplicate-TIN and mismatch.
- Use the IRS CF/SF (Combined Federal/State Filing) Program via IRIS. The IRS sends accepted 1099 data to participating states, so no separate state filing is needed. However, non-participating states may still require it. So, always ensure to check with the state laws.
These can reduce the chance of missing a form and prevent a 1099-NEC e-file penalty down the line.
Fixing Mistakes: Corrections, Abatement & Reasonable Cause
Mistakes can occur even with the most careful payers. The key is to fix them quickly.
- Corrected Return
For paper corrections, follow the Error Type 1/2 charts: many corrections require checking the ‘CORRECTED’ box, but if you filed the wrong type of return, you must file a new Form 1099-NEC as an original (do not check ‘CORRECTED’) and include Form 1096. If you e-file, do not also mail the same returns on paper. - Responding to Notice 972CG
Payers generally have 45 days (60 if international) to explain why the issue occurred. Include W-9s, mailing receipts, and any records proving due diligence. - Requesting Penalty Abatement
The IRS’s one-time First-Time Abate relief does not apply to information return penalties under IRC 6721/6722. So request reasonable cause (such as natural disasters, system failures, etc.) instead. - Interest Accrual & Payment Plans
Unpaid penalties accrue interest until resolved. If needed, contact the IRS to arrange a short-term payment plan rather than letting penalties grow.
State and Industry Hot Spots for 1099-NEC Enforcement
- Several states receive 1099 data through the IRS CF/SF program and may apply their own penalties. An IRS CP2100/CP2100A (name or TIN mismatch) notice does not automatically result in state penalties.
- Industries, like construction, gig platforms, and legal services, are more likely to face scrutiny because of high contractor volumes and repeated filing errors.
1099Online’s combined federal-state filing feature can minimize dual-agency exposure as one e-file submission covers both obligations where CF/SF is accepted by the state.
Possible Scenarios: How Penalties May Add Up
| Scenario | Outcome | Correction |
| Paid designer $2,400 but filed on Feb 20, 2026 | Tier 1 – $60 × 1 | File the late Form 1099-NEC as soon as possible (an original filing when none was filed by the due date) |
| Forgot to send the recipient copy to the videographer | Payee-statement penalty depends on when furnished: $60 if within 30 days past the deadline; $130 if after 30 days but by August 1; $340 if after August 1 or not furnished | Send the statement immediately with an apology letter |
| Used placeholder TIN (“00-0000000”) | Providing an invalid or missing TIN triggers a §6721 penalty ($60/$130/$340 per return, depending on when corrected). The $680 per-return amount applies if the IRS determines intentional disregard | Submit proof of a timely W-9 request and request an abatement |
| Submitted 15 paper 1099-NECs | Failure to e-file when required is penalized under IRC 6721; for most information returns, the penalty is up to $340 per return and applies only to the number of returns exceeding 10, unless facts show intentional disregard | E-file promptly and, if needed, request a waiver and document reasonable cause |
| Vendor mail returned undelivered | Penalty tiers ($60/$130/$340 under §6722) apply only if you fail to furnish by the due date
(Furnishing is satisfied if the statement is provided in person, electronically with consent, or mailed by First-Class Mail to the recipient’s last known address by the due date) |
If the mail is returned and you have a better address, re-mail |
FAQs
1. Does the $60 penalty tier apply after just one day late?
Yes, the $60 penalty tier applies if you file anytime between one day and 30 days after the due date. For 2025 Forms 1099-NEC, the due date is Monday, February 2, 2026, so a form received on February 1, 2026, is timely, whereas a form received on February 3, 2026, would be one day late and subject to the $60 tier penalty.
2. Do corporations have to file 1099-NEC?
Yes. If a corporation makes reportable payments in the course of its trade or business, it must file information returns including Form 1099-NEC for $600+ in nonemployee compensation. The filing obligation depends on the payer’s activity (trade or business), not the payer’s entity type.
3. What if total payments are under $600, but backup withholding applied?
You must file a form regardless of the amount when federal income tax (e.g., backup withholding) has been withheld.
4. Can I evade penalties if I file Form 8809?
Filing Form 8809 can extend the IRS filing due date (if approved), but does not extend the recipient furnishing deadline unless you separately obtain that extension. The January 31/next-business-day rule still applies to 1099-NEC recipient statements without an approved furnishing extension.
5. What if my e-file gets rejected?
If your e-file is rejected, correct the error and retransmit as soon as possible. For information returns, timeliness is based on acceptance by the IRS.
6. Is there a maximum penalty limit?
Yes, however, it applies only to unintentional mistakes. Intentional disregard penalties have no limit.
Final Thoughts
The penalty for not filing 1099-NEC can reach $680 per form in 2026, and ignoring e-file requirements can multiply those fines. With deadlines fixed and penalties climbing, payers need systems that validate, track, and confirm filings automatically.
1099Online offers built-in TIN-matching, deadline reminders, and same-day e-file confirmation, which can help keep payers compliant.