Honestly, the IRS used to make it a total pain to stay compliant if you weren't a massive corporation with a dedicated accounting department. You probably remember the days of ordering those specific red-ink scannable forms from an office supply store, hoping your printer wouldn't jam, and then praying the post office didn't lose the envelope. It was a mess. But things shifted recently. If you're asking how do you file 1099 electronically, the answer has changed because of a specific threshold change that caught a lot of small business owners off guard.
The Taxpayer First Act basically forced the IRS to modernize. Starting in 2024 (for the 2023 tax year), the threshold for mandatory electronic filing dropped from 250 forms down to just 10. That is a huge jump. If you have 11 contractors, you literally have to file electronically now. There is no "I'll just mail it" option anymore unless you want to deal with potential penalties that can eat your margins for lunch.
Why the Old FIRE System Isn't Your Only Option Anymore
For years, if you wanted to do this yourself, you had to use the FIRE (Filing Information Returns Electronically) system. It looked like something out of 1996. You needed a TCC (Transmitter Control Code), which took weeks to get, and you had to format files in a very specific, archaic way. It was a nightmare for anyone who isn't a software developer.
Then came IRIS.
The Information Returns Intake System (IRIS) is the IRS’s way of finally joining the 21st century. It's a web-based portal. No special software is needed. You just log in and type. It’s designed specifically for the person who has a handful of contractors—maybe a graphic designer, a virtual assistant, and a local plumber—and just wants to get it over with.
But here’s the kicker: you still need to apply for an IRIS TCC. You can't just wake up on January 30th and decide to file. The application process for that code can take up to 45 days. If you’re reading this in January and you don’t have your TCC yet, you might already be in a bit of a scramble.
The Step-by-Step Reality of Using IRIS
First, you need an ID.me account. If you've accessed your personal IRS transcripts or dealt with the Social Security Administration lately, you probably already have one. You’ll use that to sign into the IRS portal.
Once you are in, you have to apply for the IRIS Transmitter Control Code. They’ll ask if you are a "Transmitter," "Issuer," or "Software Developer." Most small business owners are the Issuer. You're filing for yourself.
After you get that golden ticket (the TCC), the actual data entry is fairly straightforward. You’ll need the contractor’s legal name, address, and their TIN (Taxpayer Identification Number), which is usually their Social Security Number or an EIN. This is why you should have collected a Form W-9 from them before you ever paid them a dime. If you’re hunting down W-9s in January, you're doing "tax season" on hard mode.
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Common 1099 Variations You’ll Encounter
- 1099-NEC: This is the big one. Non-employee compensation. If you paid someone $600 or more for services, this is your form.
- 1099-MISC: People used to use this for everything, but now it’s mostly for rent, royalties, or prizes.
- 1099-INT: If you paid interest.
- 1099-DIV: For dividends.
The IRIS portal handles these through a "Manual Entry" feature. You literally fill out a digital version of the form on your screen. You click submit, and the IRS gives you a receipt immediately. It’s significantly faster than the old way, and you get that sweet, sweet peace of mind knowing it didn't get lost in the mail.
Third-Party Platforms: The "Lazy" (But Smart) Way
Let’s be real. Not everyone wants to navigate an IRS portal, even a "new" one. There are a ton of third-party services like efile4Biz, Tax1099, or even the built-in tools in QuickBooks and Xero.
These companies charge a fee—usually anywhere from $1.50 to $5.00 per form—but they do something the IRS portal doesn't do well: they handle the recipient copy. When you file with the IRS, you're only handling the government's side. You still have to get a copy of that 1099 to your contractor. Third-party sites will often email a secure link to the contractor or even snail-mail a paper copy for you.
For many, paying $20 to have five forms filed and mailed is a bargain compared to the time spent logging into a government portal and then heading to the post office anyway to mail the contractor's copy.
The Trap of the "10-Form Limit"
The IRS consolidated the limit. It’s not 10 of each form. It’s 10 forms total. If you have eight 1099-NECs and three 1099-MISCs, you are at 11 forms. You must file electronically.
If you try to mail them, the IRS might accept them, but they can issue a penalty per form. For a small business, those penalties add up fast. We’re talking $310 per form in some cases for late or incorrect filing. It’s not worth the risk.
What About State Filing?
This is where it gets hairy. Just because you filed electronically with the IRS doesn't mean your state knows about it. Many states participate in the Combined Federal/State Filing (CFSF) Program. Under this program, the IRS shares the info with the state.
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However, not every state plays nice.
States like Pennsylvania or Oregon often have their own specific requirements or want you to upload files directly to their Department of Revenue portals. You have to check your specific state’s "Nexus" rules. If you're using a third-party filing service, check if they include state filing. Most do, but some charge extra for it.
Correcting Mistakes Without Losing Your Mind
Mistakes happen. You realize you misspelled a last name or transposed two digits in an EIN. If you filed via paper in the past, you had to send a new form with the "Corrected" box checked.
In the IRIS system, you can issue corrections electronically. It’s much cleaner. You find the original submission, select the option to correct it, and submit the change. The system tracks the versions.
Pro-Tips for a Painless Filing Season
- Verify TINs Early: Use the IRS TIN Matching service if you have a lot of contractors. It prevents the dreaded "B-Notice" later in the year where the IRS tells you the name and number don't match.
- Don't Wait for the Deadline: January 31st is the deadline for 1099-NEC. If that falls on a weekend, you get until Monday. But the IRIS system has been known to lag when everyone in America tries to log in at 11:00 PM on the final night.
- Keep Your Records: The IRS recommends keeping tax records for at least three years. Digital copies of your 1099s count, but make sure they are backed up in more than one place.
Final Action Steps
If you're ready to tackle this, don't overthink it.
- Gather your W-9s. If you’re missing one, email the contractor today. Tell them you can't send their payment or their tax form without it.
- Audit your books. Run a report in your accounting software for any vendor paid over $600 via cash, check, or ACH. Note: Payments made via credit card or PayPal are usually reported by the payment processor on a 1099-K, so you generally don't include those on your 1099-NEC. This is a common point of double-reporting!
- Choose your path. If you want free, go with the IRS IRIS portal, but apply for your TCC immediately. If you want convenience and want someone else to mail the copies to your contractors, pick a reputable e-file service.
- Confirm state requirements. Check if your state requires a separate filing or if they are part of the CFSF program.
- Submit and Save. Get your confirmation number and save the PDF copies for your permanent records.
Filing 1099s doesn't have to be a dark cloud hanging over your January. The transition to electronic filing is actually designed to make your life easier once you get past the initial hurdle of setting up your account. Get it done early so you can get back to actually running your business.