The IRS uses a tiered penalty structure based on how late you file. The longer you wait, the more you pay per form. For the 2024 tax year, the penalties break down like this.

If you file within 30 days of the January 31 deadline, the penalty is $60 per form. File more than 30 days late but before August 1, and it jumps to $130 per form. File after August 1 or don’t file at all, and you’re looking at $330 per form. These amounts apply to each 1099 you were required to file, so a business that uses ten subcontractors and misses the deadline could face penalties adding up quickly.

There’s a separate and much steeper penalty for intentional disregard. If the IRS determines you deliberately chose not to file, the penalty is $660 per form with no maximum cap. This applies when a business knows it has a filing obligation and simply ignores it, which is different from an honest mistake or oversight.

Small businesses with gross receipts of $5 million or less get lower maximum penalty caps for the year. The cap is $232,500 if you correct within 30 days, $664,500 if corrected by August 1, and $1,328,500 for forms filed after August 1 or not filed at all. These maximums provide some protection, but for most small businesses, even the per-form penalties add up to real money.

The penalties also apply to forms filed with incorrect information like a wrong taxpayer identification number or wrong dollar amount. If you catch the error and file a corrected form within 30 days, you get the lower penalty rate. This is why collecting accurate W-9s from every subcontractor and vendor before you pay them matters so much. Chasing down a TIN in January when forms are due creates exactly the kind of rush that leads to errors or missed deadlines.

Penalties apply separately to the forms you send to the IRS and the copies you provide to recipients. If you fail to furnish the recipient copy on time, that’s a separate penalty on top of the filing penalty.

The practical takeaway for small businesses is that the filing deadline is not flexible. January 31 is when 1099-NEC forms are due to both the IRS and the recipients. There is no automatic extension for 1099-NEC forms like there is for some other information returns. If you paid any individual or unincorporated business $600 or more for services during the year, you need a 1099 filed on time.

The best way to avoid penalties is to stay organized throughout the year rather than scrambling in January. Keep W-9s on file for every subcontractor, track payments as they happen, and start preparing forms in early January. 1099 preparation is straightforward when the records are clean, but it becomes stressful and error-prone when you’re reconstructing a full year of payments at the last minute.

If you’ve already missed a deadline, file as soon as possible. The tiered structure rewards faster correction, so every day you wait moves you closer to the next penalty tier. And if your books aren’t in good enough shape to know who needs a 1099, that’s a sign you need help with your business tax preparation and recordkeeping before the next filing season.