No one here has stated why the taxpayer isn't in compliance. No one has stated the taxpayer isn't willing to change that, either. When someone isn't in compliance, you should reveal the possible consequences. The taxpayer should be informed as to what is required and what can happen. I use the word "discoverable" as in, if any of this is examined, there is plenty about this to be examined. I didn't state there was misclassification; it is possibly revealed, when something is examined. There is no yes/no condition here. It needs to be discussed. Even the penalties provide for variability: not issuing the forms has a different penalty than not being willing to issue the forms.

"If a business fails to issue a form by the 1099-NEC or 1099-MISC deadline, the penalty varies from $50 to $270 per form, depending on how long past the deadline the business issues the form. There is a $556,500 maximum in fines per year. If a business intentionally disregards the requirement to provide a correct payee statement, it's subject to a minimum penalty of $550 per form or 10% of the income reported on the form, with no maximum."