Do you have to report income shown on a 1099?

Yes, always. A 1099, whether it's a NEC, MISC, INT, DIV, K, or any other variant, is an information return: the payer's report to the IRS and to you about money you were paid. The form doesn't determine whether the income is taxable; it just documents a payment that was already taxable when you received it. Leaving it off because the amount looks small, or because you disagree with the number, isn't a judgment call a preparer gets to make quietly.

What if the recipient copy never actually arrived?

Doesn't matter. A payer that files a 1099 with the IRS is required to send the recipient's copy too, but a copy that's lost in the mail, sent to a stale address, or skipped because the payment fell under the payer's own reporting threshold doesn't erase the underlying income. The obligation to report runs from earning the income, not from receiving the paperwork that documents it. The same income is taxable with or without a form in the client's file, which is the same principle that applies when no 1099 exists at all.

What actually happens if a return leaves out income the IRS has a 1099 for?

The IRS runs an automated matching program that compares the income, payment, and credit information it received from employers and financial institutions against what's reported on the filed return. When "the income or payment information we received from third parties... doesn't match what you reported," the IRS sends a CP2000-series notice proposing a correction and the additional tax that goes with it. That process runs off the payer's copy of the 1099, independent of anything the taxpayer's own return says.

Where this actually breaks at review

A client hands over a folder of 1099s and treats it as the whole income picture, when in practice a mismatch usually comes from a form that's missing from the folder, not one that's wrong. The fix isn't asking the client whether they think a number is right; it's reconciling every 1099 in hand against the IRS matching program the client can't see, before the notice does it for you months later. The same reconciliation discipline applies on the other side of the line, where a payment never generated a form at all: cash and other income with no 1099 attached is still reportable