FIRE System Shutdown, IRIS Updates, and State 1099 Compliance: What You Need to Know Now

With year-end approaching, now is the time to review your e-filing strategy and state compliance obligations. Between the IRS FIRE system shutdown, updates to IRIS, and complex state 1099 rules, taking action early can save your team stress and avoid last-minute surprises.

Key Steps to Take Now

1. Identify which contractors and states may require 1099 filings.
2. Decide whether you’ll file via IRIS, FIRE, or a third-party vendor. If using IRIS, start the login and TCC process early (approval can take up to 45 days).
3. Review Department of Revenue websites periodically for updates to state filing requirements.
4. Note CF/SF program participation and confirm which states still require separate filings.

Earlier this year, the IRS announced that it is targeting December 2026 as the official shutdown date for the FIRE system. While that may sound far off, the practical impact is much closer than it appears. When the IRS says December 2026, it means the FIRE system will fully go dark at that time. As a result, 2025 forms filed in 2026 will be the last information returns you can submit through FIRE, assuming the IRS timeline stays on track.

E-Filing Information Returns: Your Options

The IRS currently supports two systems for electronic filing of information returns: FIRE and IRIS. You have two main options for e-filing:

• File yourself using FIRE or IRS (free, but requires a login, TCC, and properly formatted files).
• Work with a third-party vendor (fee-based, but they handle the technical connection to FIRE or IRIS for you).

Key IRIS Updates for 2025

Many filers have been hesitant to move from FIRE to IRIS due to past limitations. Previously, IRIS could not accommodate Form 1042-S and limited filers to 100 forms per batch. For 2025, IRIS will support Form 1042-S, which is a major improvement. However, the 100-form-per-batch limitation still remains.

What You Should Do Now

If you plan to use IRIS for 2025 filings and don’t already have a login, it’s important to start the setup process as soon as possible. IRIS requires its own TCC, your FIRE TCC will not work, and approval can take up to 45 days. If you plan to partner with a third-party filing vendor, now is also the time to begin those conversations. Waiting until January can lead to delays, limited availability, and unnecessary stress during peak filing season.

Don’t Overlook State 1099 Filing Requirements

Year-end is also the right time to reassess your state-level 1099 obligations. State rules vary widely, filing methods differ, and requirements change frequently.

For contract labor, state 1099 filing requirements are generally based on where the work is physically performed, not where your company is located. For example, if your business is based in Texas but your contractor works remotely from North Carolina, you’ll need to follow North Carolina’s 1099 rules, not Texas’.

Some states participate in the IRS’s Combined Federal/State Filing Program (CF/SF), but participation is limited and some states still require separate filings.

Takeaway

Start by reviewing contractor locations, creating a list of states where you may have filing obligations, and checking Department of Revenue websites periodically throughout the year. Consistent review can help you catch changes early and reduce stress at year-end.