Will the IRS catch a missing 1099? What could happen if you don’t report it
Sep 9, 2025・5 min read
Every tax season, some filers realize after submitting their return that they left out income from a 1099. Because the IRS uses an automated system to match what payers report against your return, it’s safe to assume the IRS will catch a missing 1099, whether the form never arrived or you simply overlooked it.
Freelance work, investment gains, and crypto transactions on U.S. custodial brokers (beginning with 2025 transactions, reported on the new Form 1099-DA) all generally require 1099 reporting, and skipping them can lead to notices, penalties, or even an audit.
In this guide, we'll explain how to handle missing 1099 income on your tax return, from the risks of leaving it out to fixing mistakes and staying compliant.
What happens if you don’t report a 1099?
Failing to report income from a 1099 can lead to unreported income penalties, interest, or even an audit. The IRS uses an Automated Underreporter (AUR) program that matches what you file on your tax return against what payers report. If the numbers don’t coincide, it’s unlikely the omission will go unnoticed.
When a discrepancy appears, your account may be flagged for review. That process often starts with a CP2000 notice, a computer-generated letter outlining the unreported income, any taxes you owe, and potential interest or penalties. It isn’t a formal audit, but it does require a response. Importantly, a CP2000 is a proposed adjustment — taxpayers can provide documentation if they believe the notice is incorrect.
Interest typically accrues from the original due date until the IRS receives payment in full. In some cases, you may face accuracy-related penalties of up to 20%. If the IRS believes the omission was intentional, the situation may escalate to fraud charges and a full audit.
How does the IRS know if you missed a 1099?
When it comes to the IRS matching 1099 forms, the process is almost fully automated. For every 1099 you receive – whether a 1099-NEC, 1099-MISC, 1099-B, 1099-DA, 1099-INT, 1099-DIV, or 1099-K – a copy also goes to the IRS. Using your Social Security number or taxpayer identification number (TIN), the system compares the income reported on those tax forms with the figures on your tax return. Even a minor discrepancy can trigger a flag for review.
Sometimes it takes months for inconsistencies to show up, but once they do, the IRS will typically issue a CP2000 outlining the unreported income, any tax liability or interest, and the steps you need to take to resolve it.
Can you get in trouble if you didn’t receive a 1099?
In short, yes. Even if a 1099 wasn’t received, you still have to report the income on your tax return. Forms go missing for all kinds of reasons – they get lost in the mail, are sent late, or never issued because the payer made a mistake. The IRS still expects taxpayers to report all taxable earnings, whether or not the form arrives.
If your 1099 never arrives, use other records, like bank statements, invoices, and payment confirmations, to figure out your income before you file your tax return. Taxpayers can also request a wage and income transcript from the IRS, which shows all income reported, such as that on W-2s and 1099s.
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How to fix a mistake or report a missing 1099
The IRS knows mistakes happen. If you realize income from a 1099 is missing from your tax return, the best move is to correct it quickly and limit any penalties.
Start by comparing your income from your 1099 with what you reported to figure out the missing amount. If there’s a difference, you can file an amended return using Form 1040-X. This form shows the original numbers, the corrected ones, and the difference between them.
Next, pay any tax liability as soon as possible to reduce interest charges. If you’re unsure about any step in the process, whether it’s understanding taxable amounts or filling out the forms, a tax professional can help you.
Acting fast matters, so correct any mistakes on your tax return with an amended return as soon as possible. It usually means less interest and smaller penalties.
Tips to avoid omitting a 1099
A little organization goes a long way in preventing 1099 issues on your tax return. Here are a few strategies to help you sidestep trouble:
- Track every income source: Keep a running log of freelance work, independent contractor jobs, investment activities, and payments from platforms like PayPal.
- Check for digital forms early: Many payers post 1099s online before mailing them. Downloading them early gives you more time to review.
- Use reliable tax software: Tools like CoinTracker can help reconcile your crypto with your 1099s and other wallet/exchange activity, including reporting under the new 1099-DA. Since Form 1099-DA may not capture all digital asset activity (e.g., self-custody wallets or DeFi), reconciliation tools remain critical to ensure complete reporting.
- Set calendar alerts: Payers must generally send out 1099s between January 31 and February 15. Set reminders to be on the lookout for these forms between January and March to confirm you’ve received them all.
- Work with a CPA: If you have multiple income streams or a complex return, a tax pro can organize your records, track deductions, and ensure 1099 tax compliance.
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FAQ
Will the IRS catch a missing 1099?
In short, most likely. The IRS uses an automated system to match each 1099 from a payer with the income you report on your tax return. If the numbers don’t line up, the system notes the discrepancy for follow-up.
What happens if I forget to include a 1099 on my return?
When the IRS spots a difference, they may send a CP2000 notice. This letter explains the unreported taxable income, calculates any tax liability and penalties, and tells you how to make corrections. In most cases, you’ll need to file an amended return to bring your filing into compliance and limit further interest charges.
What should I do if I receive a 1099 form with errors?
Contact the payer right away and request a corrected form. Don’t file your tax return with incorrect information. If you’ve already filed, submit an amended return using Form 1040-X once you receive the updated 1099 so the IRS records match exactly.
Can I fix a tax return after forgetting a 1099?
Yes, filing Form 1040-X allows you to amend your tax return, adding the missing income, and paying any tax liability. Doing this as soon as possible usually reduces interest charges and lowers the risk of an audit.
What happens if I lose my 1099?
Ask the payer for another copy of the 1099. If it doesn’t arrive in time, use your own documentation – such as bank records, invoices, or proof of payment – to include the income on your tax return. You can always request a wage and income transcript from the IRS, which will show all amounts reported to the IRS. The IRS expects taxpayers to report all income, even if they don’t have the original form on hand.
Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.