The 1099 family of information returns (1099-NEC for non-employee compensation, 1099-MISC for miscellaneous payments, 1099-K for payment-card and third-party network transactions, plus 1099-INT, 1099-DIV, 1099-R, and others) must be filed with the IRS and furnished to the payee by the applicable deadlines. Failure on either count triggers a separate penalty.

The tier structure

Both §6721 and §6722 use a four-tier structure based on lateness, with per-form amounts adjusted annually for inflation. For 2026:

  • Tier 1 — filed within 30 days of due date. $60 per form.
  • Tier 2 — filed between 31 days and August 1. $130 per form.
  • Tier 3 — filed after August 1 or not filed at all. $330 per form.
  • Intentional disregard. $660 per form, no annual cap.

Because §6721 (IRS copy) and §6722 (payee copy) operate independently, a business that filed late with both can face double the per-form penalty. A 100-form Tier 3 failure on both counts: $66,000.

— The De Minimis Exception —

The IRS does not assess §6721 penalties for failures involving incorrect information (not late filing) if the total number of erroneous returns is the lesser of 10 or one-half of one percent of total returns filed. This narrow exception applies to data errors, not to late filing.

The 1099-NEC deadline trap

Since 2020, Form 1099-NEC (for non-employee compensation paid to independent contractors) has had a January 31 deadline for both IRS filing and payee delivery — the same date. Other 1099 series forms have staggered deadlines (typically February 28 paper / March 31 electronic for the IRS copy, January 31 for the payee copy). Many small businesses miss the early January 31 IRS deadline because they associate 1099s with the broader February/March cycle.

How to abate the penalty

  1. Reasonable Cause. The IRS will abate §6721 / §6722 penalties when the business establishes reasonable cause — including reliance on a payroll provider that failed, records destruction, illness of the responsible employee, or natural disaster. See reasonable cause.
  2. FTA (limited). First-time abatement applies to some information return penalties — the IRS published guidance in IRM 20.1.7 limiting FTA to specific circumstances. Worth requesting when applicable.
  3. Statutory Exception. If the penalty was caused by IRS error in processing or by incorrect written advice, §6664(b) provides relief.
IRS Code Section
IRC §6721 (file with IRS) · §6722 (furnish to payee)
Tier 1 (30 days late)
$60 per form · capped at $664,500 (2026)
Tier 2 (31 days – Aug 1)
$130 per form · capped at $1,993,500
Tier 3 (after Aug 1 or not filed)
$330 per form · capped at $3,987,000
Intentional Disregard
$660 per form (no cap)
Filing Forms
1099-NEC, 1099-MISC, 1099-K, 1099-INT, 1099-DIV, etc.
Abatement Grounds
Reasonable Cause · De Minimis · FTA