Insights

IRS Changes 1099 Regulations

January 10, 2024

January not only brings a new year, resolutions, and pork and sauerkraut, it also kicks off the 1099 filing season! If a business has paid over $600 this year to their vendors, they may need to file 1099s.

Filing Changes

The IRS has made changes to their e-filing regulations. In prior years, a taxpayer was able to file 1099s on paper if they had fewer than 250 forms of each type of 1099. However, this number has been reduced for 2023 down to 10 forms in total. If a taxpayer has 10 or more 1099 forms, including all types of 1099s, to file, they must now e-file the forms.

The IRS has created a free online portal for filers known as IRIS (Information Returns Intake System). The IRIS is a secure service which requires no special software. Enrollment is open to apply for a Transmitter Control Code (TCC), which may take up to 45 days for processing. The TCC is a 5-digit code that is used to identify a business during e-filing; it is only used with IRIS.

Using IRIS, a taxpayer can file any Form 1099 for tax year 2022 and later. This e-filing system also allows taxpayers to file corrections and request automatic extensions for 1099s. It is a free system that permits one to e-file up to 100 returns at a time either manually or using an upload file. It will also keep a record of the forms that have been completed, filed, and distributed. IRIS is available to businesses of all sizes but may be especially helpful to small businesses that currently send paper 1099 forms to the IRS.

If one has used the IRS FIRE (Filing Information Returns Electronically) system in the past to e-file 1099s, they are still able to use that system for 2023. Please note that the TCC for FIRE is different than the TCC for IRIS.

Why the Changes?

Availability of e-filing systems has increased, and it is becoming preferred to file online rather than by paper. Not only does it reduce the volume of paper returns, but it also reduces postage, printing, and shipping costs. Moving to an online filing system frees up IRS staff and resources and also saves time and money for business owners.

The deadline for filing 1099s is January 31, 2024. If a taxpayer files late, files with incomplete information, or fails to file, they are subject to penalties between $50-$580 per form for failing to file correctly.

In conclusion, if a business has made payments that exceed $600 to vendors, they may need to file 1099s. If one has ten or more 1099 forms to file, they must e-file per the new regulations. If someone is unsure if their business needs to file 1099s or if they have more than ten forms and are uncertain of next steps, they should reach out to an accounting professional for guidance and assistance.

If you would like to talk to one of our professionals on any other business-related topic, please do not hesitate to contact a member of our Outsourced Accounting team.

This article was co-authored by Senior Accountant Becky Lauffer and Accounting Administrator Micah Mance.