Yes. You need a long tern visa or extension of stay to represent the reason that you are spending a long time in Thailand, Basically, Immigration are telling you that you are no longer a tourist.
It is requested by Immigrationb but not always required. Immigration will ask for your 12 month lease and you need to provide it if you have one. If you do not have a lease, then Immigration will question you about your accommodation and may then require additioanl documentatio. In my case, I do not have a lease because I live in my (Thai wife's) home. So I must provide my house book to Immigration.
Even if Immigration denied your application for an extension (eg if you already had on extension) they would give you a stamp giving you 7 days to leave the counrty.
My experience of living here for well over 10 years is that Immigration will always take action if they find people working without an appropriate work permit. Period. Trouble: big fime, jail, expulsion from the kingdome. ban on reentry.
Depending how many times you come to Thailand, at some stage Immigration will pull you up because they believe that you are no longer a tourist and will want you to have a visa appropriate to your reason for staying long term in Thailand.