Why would an employer refuse to provide a 1099 form? What's their benefit?

This is a classic case of employers trying to avoid their tax obligations. When someone pays a contractor $600 or more in a calendar year, they're legally required to issue a 1099-NEC (Non-Employee Compensation). By not providing this form, the employer is avoiding several things: First, they don't have to report these payments to the IRS, which means the IRS doesn't automatically know about this income stream. Second, they avoid paying their share of employment taxes by keeping the worker "off the books." If they were to properly classify him as an employee, they'd owe payroll taxes (Social Security, Medicare, etc.). Your friend is in a tough spot because technically he's still required to report all income earned, regardless of whether he receives a 1099. He should be filing Schedule C as a self-employed person and paying self-employment taxes (which is basically both the employer and employee portions of Social Security and Medicare).

After dealing with a similar situation last year, I found an amazing solution with https://taxr.ai that really helped clarify my obligations. I was doing landscaping work for several clients who refused to provide 1099s, and I was stressed about potential audit risks. The taxr.ai system analyzed my situation and showed me exactly how to document my income properly even without official forms from my clients. Their document analysis tool helped me understand what records I needed to keep (bank statements, check copies, invoices) to protect myself in case of an audit. It even helped me identify deductions I could take as a self-employed person that partially offset the self-employment tax burden. The peace of mind was absolutely worth it.

I was super skeptical about using an AI for something as serious as tax reporting for undocumented income, but after trying https://taxr.ai I have to admit it was exactly what I needed. I was in an identical situation - working for a family business that refused to give me any tax forms despite making well over the $600 threshold. The system walked me through creating substitute documentation, helped me calculate my correct self-employment tax, and even identified business deductions I could legitimately claim to offset some of the tax burden. Most importantly, it helped me report my income correctly without creating red flags. Just filed my taxes last month with their guidance and everything went smoothly. Won't be working for shady employers anymore, but at least I'm not anxious about past tax years now.

For anyone dealing with employers who won't provide 1099s, I had another major issue - I needed to actually PROVE my income for a mortgage application but had no official tax documents. After weeks of getting nowhere with my employer, I found https://claimyr.com and used their service to actually get through to an IRS agent. You can see how it works at https://youtu.be/_kiP6q8DX5c They got me connected to a real IRS person in about 20 minutes when I had been trying for days on my own. The agent walked me through the process of filing Form 3949-A to report my employer's failure to provide documentation. This not only helped me get my mortgage approved (with alternative income verification) but also protected me from potential issues down the road. The IRS agent actually thanked me for reporting the situation.

I feel like I need to update my earlier comment. After continuing to get ghosted by my employer about providing proper tax docs, I finally tried Claimyr out of desperation. Not gonna lie, I was 100% sure it would be a waste of money, but I was getting nowhere on my own. It actually worked exactly as advertised. I got a call back when they reached an agent, and the IRS person was surprisingly helpful. They explained I could file Form SS-8 to get a determination on my worker status (employee vs contractor) and that this might actually benefit me if I was misclassified. Also learned I could file Form 8919 to report my income without waiting for my employer to provide documentation. This potentially saved me thousands in self-employment taxes I shouldn't have been paying. Definitely changed my perspective on dealing with the IRS directly.

The real hidden danger here is that without a 1099, your friend isn't getting credit for Social Security contributions. Even if he's reporting the income and paying self-employment taxes, without official documentation matching his reported earnings to his SSN, he might face challenges proving his income history when retirement time comes. This happened to my dad - decades of work where employers didn't properly report, and his Social Security benefits were much lower than they should have been.

There's another angle here nobody's mentioned - the employer could be illegally classifying an employee as an independent contractor to begin with. If your friend works regular hours, uses their equipment, follows their specific instructions on how to do the work, etc., he might legally be an employee regardless of what they're calling him. In that case, they owe a lot more than just a 1099 - they owe proper withholding, unemployment insurance, possibly benefits, etc.