The IRS has increased enforcement for information returns, which means businesses that file 1099 forms late or with errors risk significant penalties. Understanding how the penalty structure works helps you reduce exposure and plan a clean 1099 reporting season.
This guide provides a simplified and straightforward explanation of IRS 1099 penalties.
How IRS 1099 Filing Penalties Work
The IRS assigns penalties based on when you submit your original returns and when you submit corrections to fix any errors. These penalties are charged per form, which means mistakes scale fast for businesses filing larger volumes.
Penalties are divided into three timing tiers.
| Year due | Up to 30 days late | 31 days late through August 1 | After August 1 or not filed |
| 2026 | $60 | $130 | $340 |
Tier 1: Filed Within 30 Days
If you file your 1099 forms within 30 days after the IRS deadline, you fall into the lowest penalty tier.
Example:
A small business files 25 Forms 1099-NEC on February 20, which is late but still within 30 days of the January 31 deadline. All 25 forms fall within the tier one penalty range.
Penalty: 25 × $60 = $1,500
This is the most forgiving tier because the IRS assumes errors caught and corrected early have minimal impact on tax administration.
Tier 2: Filed by August 1
Original 1099 forms or corrections are submitted after 30 days, but before August 1. This falls into the mid-level penalty tier.
Example:
A filer realizes in May that five 1099-NEC forms reported the wrong dollar amount. They submit corrections on June 10, which places them in Tier two.
Penalty: 5 × $130 = $650
Businesses still have reasonable time to discover issues, run TIN validations, correct recipient data, and submit updated files.
Tier 3: Filed After August 1
Forms filed or corrected after August 1 fall into the highest penalty tier.
This is where many filers are surprised. They believe that corrected errors were corrected. However, if those corrections were not submitted and accepted by the IRS by August 1, the IRS treats those records as incorrect, pushing them into the top tier.
Example:
A business receives a CP2100 notice for four 1099-NEC Name TIN mismatches in September. Because corrections were not made by August 1, all four fell into Tier three.
Penalty: 4 × $340 = $1,360
This tier is not the same as intentional disregard, which carries an even higher penalty amount.
Why Name and TIN Mismatches Fall Into the “After August 1” Tier
Many organizations first learn about Name and TIN mismatches when they receive a CP2100 or CP2100A notice, often called a B-Notice, from the IRS.
A B-Notice alerts you that one or more of the 1099 records you filed contained a taxpayer name and taxpayer identification number combination that did not match IRS records.
Here is the part that causes the most confusion:
A name TIN mismatch does not immediately trigger an IRS penalty after August 1.
Instead, this is what actually happens:
- You file 1099 forms with name TIN mismatches.
If those mismatches are not corrected by August 1, they are simply unresolved errors in the IRS system. - The IRS issues a CP2100 or CP2100A (B-Notice) to the payer.
This notice informs you that your original filings contained incorrect TIN information. - It becomes the payer’s responsibility to solicit corrected information.
You must follow the IRS solicitation rules, including sending first and possibly second solicitations depending on the situation. - No penalty is assessed at this stage.
The B-Notice is a warning and a compliance trigger, not a bill. - One year later, the IRS issues a proposed penalty notice (972CG).
This proposed penalty is $340 per incorrect record, which represents the highest non-intentional penalty tier for uncorrected TIN errors. - At this point, the payer must either:
- Accept the penalty
- Or file a penalty abatement request demonstrating that they followed IRS solicitation requirements and exercised proper due diligence
Why August 1 Still Matters
While the penalty is not assessed on August 1, the August 1 deadline determines which records remain uncorrected for the year.
Any name TIN mismatch that is reported incorrectly, not corrected before August 1, and appears on the CP2100 notice, will be treated as an uncorrected error in the IRS matching system. These are the records that later qualify for the $340 per form proposed penalty on the 972CG notice.
Intentional Disregard is a Separate, Higher Penalty
Intentional disregard applies when a payer knowingly chooses not to file required forms or chooses not to provide correct information. This penalty is significantly higher than the standard late filing tiers and bypasses the timing windows entirely. It is reserved for situations where the IRS believes the payer willfully attempted to avoid compliance.
IRS Penalty Structure Summary
Below is a simplified view of how the penalty buckets work.
| Timing of Filing or Correction | Penalty Tier | Penalty Amounts for 2026 per record | Notes |
| Filed within 30 days | Lowest tier | $60 | Least financial impact |
| Filed by August 1 | Mid tier | $130 | Still eligible for reduced penalty |
| Filed after August 1 | Highest tier | $340 | Includes uncorrected Name TIN mismatches |
| Intentional disregard | Maximum penalty | $680 | Separate category used for willful noncompliance |
How to Avoid Name TIN Mismatch Penalties
Since name and TIN issues drive many penalties into the highest tier, prevention and early validation are essential.
Best practices include:
- Validate TINs before payment and before filing using an IRS approved real-time verification service. This reduces CP2100 notices and mismatches at the source.
- Collect clean W-9s from every vendor or payee to ensure you have the correct legal name and Taxpayer Identification Number.
- Correct errors quickly and resubmit them before August 1 to avoid the highest penalty tier.
- Track and manage corrections through a system that provides audit trails, validation tools, and error tracking.
The Bottom Line
IRS 1099 penalties are based on how late your original filings and corrections are received. The after August 1 tier often surprises many filers because name/TIN mismatches identified through CP2100 notices fall squarely into this category if not corrected in time.
Understanding the tiers and correcting errors early protects your business from the highest penalty amounts and from increased IRS scrutiny.