From FIRE to IRIS and beyond: Preparing for 2026 reporting changes to 1099 compliance

• Businesses face major shifts in 1099 compliance for the 2026 tax year. These include the FIRE-to-IRIS transition, proposed W-9 updates, reporting threshold changes, and evolving state reporting requirements.
• The move from FIRE to IRIS changes how businesses must prepare for filing. Because IRIS validates information during submission rather than months later, businesses need to move from a submission-first mindset to a validation-first mindset.
• Technology can simplify the transition. Automating W-9 collection, TIN validation, and filing workflows can help organizations improve accuracy, adapt to changing requirements, and reduce manual effort.

Now is the time to review your data validations and 1099 filing workflows. Preparing early can help reduce manual corrections, decrease compliance risk, and position your organization for a smoother filing season.

Several changes in information return reporting will require businesses to take a good look at their 1099 preparation processes. The most notable include:

• The FIRE-to-IRIS transition, which changes how 1099 information returns are formatted, transmitted, and validated.
• Proposed revisions to Form W-9, which emphasize collecting complete and accurate taxpayer information during vendor onboarding rather than correcting errors after forms have been filed.
• Reporting threshold updates, which may affect filing requirements. Under these changes, the 1099-K reporting threshold is now $20,000 and 200 transactions. Forms 1099-MISC and 1099-NEC have more than one threshold, and several of these thresholds jump from $600 to $2,000. Annual inflation adjustments begin with tax year 2027.
• State reporting considerations, which vary as states determine how they’ll adopt federal changes and handle corrections.

Each of these changes, on its own, impacts businesses. Together, they represent a broader shift toward earlier, more proactive compliance.

On December 31, 2026, the IRS is retiring the Filing Information Returns Electronically (FIRE) system and replacing it with the Information Returns Intake System (IRIS) — one of the most significant changes to electronic information return filing in decades. Beginning with tax year 2026 filings submitted during the 2027 filing season, IRIS will become the primary system for electronically filing information returns with the IRS. More than a technology upgrade, the transition introduces new filing formats, credential requirements, and validation processes that require organizations to prepare more thoroughly before submitting 1099 forms.

For decades, organizations generated flat files using IRS Publication 1220 specifications, uploaded those files to FIRE, and received relatively limited validation before submission was accepted. IRIS modernizes this process by introducing XML-based filing formats, new submission methods, and more comprehensive validation during submission.

Organizations filing electronically will generally use one of two methods.

Designed primarily for smaller filers, the portal allows organizations to upload files directly to the IRS. The CSV upload limit was recently increased from 100 to 250 records per file, making it easier for organizations to submit larger batches through the portal.

Larger organizations and software providers may instead integrate directly with IRS systems through APIs. While A2A offers greater automation, implementation requires significantly more planning and technical preparation. Organizations must obtain an IRIS Transmitter Control Code (TCC), complete identity verification, obtain an API Client ID, and successfully complete testing before receiving production approval.

The transition to IRIS also introduces new credential requirements. Businesses will need an IRIS-specific Transmitter Control Code (TCC) and must complete updated identity verification before submitting returns. Existing FIRE TCCs cannot be reused with IRIS. Approval may take several weeks, so businesses should begin the application process well in advance of filing season.

Under FIRE, many organizations operated under a “submit first, correct later” approach. Files were checked primarily for formatting issues, while many data problems weren’t discovered until months later. Organizations often believed a filing had been successfully completed, only to learn later about vendor information errors requiring corrections.

Under IRIS, validation comes before submission. Organizations should expect stricter validation during submission for elements such as:

• XML formatting
• File structure
• Schema compliance
• Required data fields
• Name and TIN combinations

IRIS introduces more nuanced submission results, with organizations learning about issues immediately instead of months later. Possible outcomes include:

• Accepted: The submission meets all requirements.
• Accepted with errors: The file is accepted, but one or more forms in the submission need to be updated in some way. For example, the system would identify when a name and taxpayer identification number (TIN) don’t match IRS records.
• Rejected: If validation problems are significant or multiple issues occur together, the IRS may reject the submission outright.

Under IRIS, successful 1099 filing begins with accurate W-9 collection. Many organizations still treat W-9 collection and 1099 reporting as separate processes owned by different teams. Vendor information is often collected during onboarding, while tax reporting doesn’t become a priority until months later during filing season. Under IRIS, that disconnect becomes much more problematic. Because validation occurs at the time of submission, incomplete or inaccurate vendor information is more likely to result in filing errors, rejected submissions, or additional remediation.

Common vendor data issues that previously surfaced after filing are now more likely to impact submission itself, including:

• Missing W-9s
• Missing TIN
• Incorrect name and TIN combinations
• Duplicate vendor records
• Legal names entered as DBAs
• Missing first and last names for sole proprietors
• Outdated vendor information

Correcting inaccurate vendor data after filing has always been costly and time-consuming. The difference starting with the 2026 reporting year is that organizations may have fewer opportunities to identify and resolve issues after submission. At the same time, proposed W-9 changes, evolving reporting thresholds, and ongoing uncertainty around state adoption add new layers of complexity that organizations will need to navigate.

Businesses need to move from a submission-first mindset to a validation-first mindset. Those that put proactive policies in place, including improving W-9 collection during onboarding and validating data throughout the year, will be better positioned to adapt to these changes and be prepared when filing season arrives.

Businesses should start preparing now for tax year 2026 reporting, including:

• Applying for an IRIS TCC early, if filing directly with the IRS. IRIS caps 1099 uploads at 250 forms per file. Filers with a third-party provider like Avalara don’t need a TCC.
• Reviewing vendor onboarding workflows.
• Strengthening W-9 collection policies.
• Evaluating how information moves from vendor onboarding through accounts payable and into IRS filing.
• Validating vendor names, addresses, and TINs throughout the year.
• Testing filing processes before filing season.
• Reviewing ERP and accounting systems to ensure they capture the information IRIS requires, particularly for sole proprietors and other payees whose information may need to be stored differently.

The sooner organizations identify process gaps, the easier it will be to address them before filing deadlines.

Preparing for the 2026 reporting changes doesn’t have to mean more manual work. Avalara helps organizations automate W-9 collection, validate taxpayer information throughout the year, and streamline information return filing.

Avalara 1099 & W-9 is designed for businesses ranging from SMBs to large enterprises. The solution matches TINs at W-9 collection (and again at filing) and validates addresses at filing to catch issues before they become costly problems. Built-in compliance logic keeps pace with evolving IRS requirements, helping teams improve data accuracy, avoid re-mailing expenses, and reduce corrections.

Avalara supports more than 40 IRS form types and integrates with leading ERP and accounting systems to simplify the end-to-end reporting process. By managing W-9 collection, vendor validation, filing, corrections, and recipient delivery from a single platform, organizations can spend less time chasing down data issues and more time preparing for a successful transition to IRIS.

Learn more about the FIRE-to-IRIS transition in our free on-demand webinar. Ready to see how Avalara 1099 & W-9 takes the stress out of filing season? Talk to a 1099 expert today.