The IRS expects you to report all income over $400 from any given source. Further, most businesses will send a 1099-MISC to contract workers as a form of documentation justifying their wage compensation expenses used to reduce their own net revenues. In other words, someone else will likely report your income, leaving a paper trail to you when you fail to report it.
Failure to report income can result in fines and penalties for your unpaid tax balance. The typical failure-to-file penalty is 5% of the unpaid tax balance, “for each month or part of a month that a tax return is late,” in the IRS’s own words. You will also incur a separate penalty for late payment. “The maximum total penalty for failure to file and pay is 47.5% (22.5% late filing and 25% late payment)” of the total unpaid tax balance.
Additionally, you may be subject to criminal prosecution for tax evasion and other violations. The IRS may seize your property, garnish your wages, or perform other actions needed to recover taxes.