Evidence
Four billion forms describe what Americans were paid. Not one of them adds up yours.
Every figure on this page comes from a primary source: IRS Data Book tables, IRS tax gap research, the 2025 tax law, Social Security Administration figures, JPMorgan Chase Institute transaction data, and the MBO Partners independent workforce study. All of them are linked at the bottom. Where we have done arithmetic on a published number we say so, and the one figure that comes from a survey rather than a government record is labelled as one.
The paper trail already exists. It is just not pointed at you.
Information returns the IRS received in fiscal year 2025.
Forms 1099, W-2, 1098, K-1 and the rest. Each one filed by somebody else, about somebody's money, and sent to the government.
Individual tax returns.
Processed by the IRS in the same year.
Source: IRS Data Book, FY2025
Information returns per return filed.
Our arithmetic: 4.47 billion divided by 162.8 million.
Of them summarise your year.
They report one payer's slice. Nobody sends you the total.
A salaried person gets one W-2 and the year is settled. If your income arrives from nine payers, you get nine slices and no one is responsible for adding them up.
And this year the trail got thinner, not thicker.
In July 2025 Congress raised the amounts that trigger a form. Both changes move the same way. Fewer payers have to tell anyone what they paid you, which means fewer copies reach you.
1099-NEC and 1099-MISC threshold.
Raised for payments made after 31 December 2025, and indexed to inflation from 2027.
Public Law 119-21
1099-K threshold, restored.
Payment apps report only above $20,000 and more than 200 transactions. The scheduled drop to $600 was cancelled.
IRS Fact Sheet 2025-08
Change to what you owe.
A threshold decides who files paperwork. It does not decide what counts as income.
A client who pays you $1,900 this year files nothing at all. The money is still income, it still carries self-employment tax, and the only record of it is now yours.
The IRS can assemble your year. You are the only party who cannot.
The Automated Underreporter program exists to match what third parties reported against what you filed. In fiscal year 2025 it closed 987,460 cases and assessed $5.9 billion in additional tax and interest. That program can only work because the assembled picture of your income exists. It is held by the government, built from other people's paperwork, and it is not shared with you.
Getting it right is not a question of character. It tracks visibility.
The IRS measures how much income goes unreported and sorts the answer by how visible that income already was. The pattern is the most stable finding in tax research, and it says nothing about honesty.
- Substantial reporting, with withholding1%
- Substantial information reporting5%
- Some information reporting17%
- Little or no information reporting55%
The same person, with the same intentions, gets it wrong on 1% of the income somebody assembles for them and 55% of the income nobody does.
Underreported in tax year 2022.
Tax understated on returns that were filed on time. It is 77% of the total tax gap.
IRS Publication 5869
From individual business income alone.
The single largest component, and almost all of it is income that no third party reports.
IRS Publication 5869
Nothing is taken out before the money reaches you.
A salaried person splits Social Security and Medicare with an employer and never watches either half leave. Self-employed, you pay both halves, on your whole profit, and nobody deducts a cent at source. The entire reserve is a decision you have to make on purpose, over and over, all year.
What the number actually is.
Self-employment tax.
12.4% Social Security plus 2.9% Medicare, charged on 92.35% of net profit. Income tax sits on top of this, not instead of it.
IRS, Self-Employment Tax
Where the obligation starts.
Net earnings of $400 trigger the filing requirement. There is no small-earner exemption underneath it.
IRS, Schedule SE
2026 Social Security ceiling.
The 12.4% portion stops here. Medicare has no ceiling and never stops.
SSA, October 2025
That is the bill, arriving on income the paperwork no longer describes, from a year nobody totalled for you.
Weaker evidence: survey, not a government record
Set nothing aside each month.
Independent workers asked whether they reserve any part of what they are paid.
Make no quarterly payments.
From the same survey. These two figures are the behaviour that the penalty numbers below are measuring.
These two figures come from the Independent Economy Council survey of 1,003 US adults, April 2022, sponsored by a company selling tax services to independent workers. Treat them as weaker evidence than every government-sourced figure on this page.
Not knowing has a price, and it is charged every year.
Estimated tax penalties.
Assessed on individual returns in fiscal year 2025.
IRS Data Book, Table 4-2
Charged in those penalties.
For paying too little, too late, across the year.
IRS Data Book, Table 4-2
Average penalty.
Our arithmetic: $12.06 billion divided by 15.7 million.
Civil penalties assessed on individual income tax returns, fiscal year 2025, by number of penalties. Underpaying estimated tax is the second most common penalty the IRS charges individuals, and it is the one a person with irregular income is most exposed to.
Estimated tax penalties cost individuals almost exactly what failure-to-pay penalties cost them, $12.06 billion against $12.09 billion, from two thirds as many penalties.
There is less room for a surprise than people assume.
27 days
The median small business holds twenty-seven cash buffer days in reserve: the number of days it could pay its bills with no money coming in.
27 days of 365
Median average daily cash balance.
Across 597,000 small businesses and 470 million transactions.
JPMorgan Chase Institute, 2016
Median daily cash in and out.
A margin of about seven dollars a day between the two.
JPMorgan Chase Institute, 2016
A tax bill that lands larger than expected does not meet a cushion. It meets twenty-seven days.
And there are more of them every year, earning more.
Americans working independently.
The fifteenth annual State of Independence study, September 2025.
MBO Partners, 2025
Earning over $100,000 a year.
A record, up 19% in a single year and 86% since 2020.
MBO Partners, 2025
Put together, the argument is short.
Billions of forms describe what you were paid, and every one of them goes to the government rather than to you. The government uses them to build a picture of your year accurate enough to charge you on. You are handed the same obligation with none of the assembly.
Getting it right turns out to follow visibility rather than character. Income somebody assembles for you is misreported one percent of the time. Income nobody assembles is misreported fifty-five percent of the time. From this year the paperwork covers less of your income, not more.
When that gap shows up, it shows up as a penalty. Nearly sixteen million of them a year, twelve billion dollars, against businesses whose median reserve is twenty-seven days deep.
Hatchly assembles the picture on your side. Every payment on the day it arrived, totalled, sorted by who paid you, with what you should set aside kept in view. Not so you can file. So you can know.
Every number, and where it came from.
Nothing here is an estimate of ours except where it says Derived, and those are plain division shown in the open.
4,474,519,835 information returns · 987,460 underreporter cases · $5.9B assessed
IRS Data Book, Table 3-8, Information Reporting Program, Fiscal Year 2025.
irs.gov/pub/irs-soi/25db-3-08-ir.xlsx15,734,656 estimated tax penalties · $12,060,514 thousand · penalty comparison chart
IRS Data Book, Table 4-2, Civil Penalties Assessed and Abated, by Type of Tax and Type of Penalty, Fiscal Year 2025. Figures are for individual and estate and trust income taxes.
irs.gov/pub/irs-soi/25db-4-02-cp.xlsx$766 average is our arithmetic on these two published figures.162.8 million individual income tax returns processed
IRS, fiscal year 2025 Data Book summary.
irs.gov/newsroom/irs-describes-agencys-activities-in-fiscal-year-2025-data-bookThe ratio of about 27 information returns per individual return is our arithmetic.1%, 5%, 17% and 55% net misreporting percentages
IRS Publication 1415, Tax Gap Estimates for Tax Years 2014–2016, published October 2022. The categories are the IRS's own: substantial information reporting with withholding, substantial information reporting, some information reporting, and little or no information reporting.
irs.gov/pub/irs-pdf/p1415.pdf$696B gross tax gap · $539B underreporting · $194B individual business income
IRS Publication 5869, Tax Gap Projections for Tax Year 2022, released October 2024. The net tax gap after late payments and enforcement is $606 billion, and the voluntary compliance rate is 85.0%.
irs.gov/pub/irs-pdf/p5869.pdf1099-NEC and 1099-MISC threshold raised from $600 to $2,000
One Big Beautiful Bill Act, Public Law 119-21, signed 4 July 2025. The threshold in section 6041(a) applies to payments made after 31 December 2025 and is indexed to inflation for years after 2026.
irs.gov/newsroom/one-big-beautiful-bill-news1099-K threshold restored to $20,000 and 200 transactions
IRS Fact Sheet 2025-08, frequently asked questions on the Form 1099-K threshold under the One Big Beautiful Bill. The Act retroactively reinstated the threshold that applied before the American Rescue Plan Act of 2021.
irs.gov/newsroom/form-1099-k-faqs15.3% self-employment tax · 92.35% of net earnings · $400 threshold
IRS, Self-Employment Tax (Social Security and Medicare Taxes). The rate is 12.4% for Social Security and 2.9% for Medicare.
irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes$184,500 Social Security wage base for 2026
Social Security Administration, announced 24 October 2025. Up from $176,100 in 2025. The Medicare portion has no ceiling.
ssa.gov/oact/cola/cbb.html47% set nothing aside monthly · 49% make no quarterly payments
Independent Economy Council, State of Taxes in the Independent Economy, April 2022. Survey of 1,003 US adults earning the majority of their income from independent work, fielded 14 March 2022.
globenewswire.com/en/news-release/2022/04/12/2421321This is the only figure on the page that comes from a survey rather than a government record, and it was sponsored by a company selling tax services to independent workers. Treat it as weaker evidence than everything above it.27 cash buffer days · $12,100 median daily balance · $381 in and $374 out
JPMorgan Chase Institute, "Cash is King: Flows, Balances, and Buffer Days", September 2016. Based on 470 million transactions across 597,000 small businesses, February to October 2015.
jpmorganchase.com/institute/all-topics/business-growth-and-entrepreneurship/insight-cash-is-king72 million independent workers · 5.6 million earning over $100,000
MBO Partners, 15th annual State of Independence in America study, released 9 September 2025.
mbopartners.com/state-of-independence2020 and 2024 comparison figures are from the same study's year-over-year reporting.
On what this page does not claim.
These figures describe the population and the cost of getting it wrong. They are not a measurement of Hatchly, which has no users yet and therefore no outcomes to report. The misreporting percentages are the most recent the IRS has published and cover tax years 2014 to 2016, and the cash buffer study covers 2015. Where a figure is older than the rest we have said so rather than rounding it forward. Nothing here is tax advice.