Most taxpayers don’t think about filing until a couple of months into the new year, with hopes of either a refund or a lower tax debt owed on April 15. But for business owners and the professionals who serve their tax needs, tax reporting processes get underway much earlier, as employers prepare a variety of 1099 forms for contractors and other payees, as well as W-2, W-3 and W-4 forms. These are commonly referred to as information returns.
Employers have a regulatory deadline of January 31 of each year to send copies of most 1099 and W-2 forms to these workers and contractors, along with copies to the IRS, as well as other state and federal agencies. While there are allowances for some extensions, failure to meet the filing deadlines can result in penalties and fines.
Small entities that file fewer than 10 information returns can do so by paper and are granted a little more time to do so, but the number of returns required can quickly add up as businesses interact with a variety of contractors and the threshold has lowered. For the current year, if a business pays an aggregate of $600 or more per year for services, rent or other purposes, it is required to prepare and submit a 1099 form reflecting those expenses.
The combination of lower thresholds, filing requirements, and ever-changing tax reporting laws have made the 1099 reporting process more and more demanding, which can lead to overworked financial staff at businesses, and increasing the possibility of costly errors. Fortunately, automation technologies from leading tax technology providers like Avalara have allowed businesses and the accounting firms that serve them to streamline and greatly increase the accuracy and timeliness of these filings.
Armanino**, one of the largest independent accounting firms in the U.S., has implemented Avalara’s 1099 & W-9 compliance system for exactly this reason: To relieve the burden on its clients, reduce risks, simplify filing processes, and create a strategic year-round plan for maintaining vendor information collection and management.
At a broader level, the firm has about 400 staff who provide business outsourcing services (BOS) and a variety of client accounting services by letting their clients offload many of the day-to-day and year-end functions associated with bookkeeping and reporting. This allows the client to focus on the real priorities of their operations.
The Power of Automation – 6 Staff Process, 76,000 1099 Forms for 4,000 Clients
While Armanino is a large firm with more than 12,000 outsourcing clients worldwide, it needs only a core team of six specialist staff to manage most of the 1099 preparation and filing services. These half-dozen professionals filed more than 76,000 form 1099s and other information returns in 2025 for more than 4,000 clients across a diverse range of industries.
This level of production is possible because all the processing functions, mailings and submissions are performed by Armanino using Avalara’s 1099 & W9 compliance automation solution, which is managed and kept accurate by Avalara’s extensive staff of tax experts . This allows Armanino, as well as firms of any size, to use the Avalara system, offering these services while maintaining personal management of client relationships. The data is easily imported or uploaded into the system, which prepares the required forms and reports−which can then be reviewed by the firm’s staff.
This level of production and precision would not be possible without Avalara’s 1099 automation technology, said Tyler DeWitt, a senior consultant at Armanino. While most of their clients also receive other accounting or consulting services from the firm, some sign on solely for the 1099 services, especially smaller entities that have become overwhelmed by trying to manually perform their own compliance.
Prior to implementing Avalara’s 1099 system, Armanino used different systems and procedures across its 20+ offices. Standardization on the Avalara platform, however, has increased their productivity and efficiency, and resulted in better client service.
“We realized that we needed a consistent approach; that we needed to centralize, standardize, optimize and create one standard process to be more efficient across the firm,” added Max Langfield, a member of the BOS team at Armanino who specializes in 1099 compliance.
Measuring ROI
DeWitt said that automation processes greatly relieved many of the repetitive and mundane tasks, and with the ability to automatically import Excel data from clients, they could complete many multi-recipient client filings in as little as 15 to 30 minutes. The time saved was in the hundreds of hours, which was so significant when they first introduced the process, that it was soon adopted as a firm-wide standard and centralized within the BOS service group.
Compared to the systems with which they each had experience in the past, both DeWitt and Langfield said that the automation capabilities of Avalara 1099 make data input and output much more accurate and faster, even when interacting with business clients who may be using antiquated bookkeeping systems. If the client’s system can output to Excel or .csv, it can be quickly imported into Avalara, and the program also has the ability to directly import from most newer accounting, online sales, and ERP systems.
“The flexibility of the Avalara system is its greatest feature, and we have customer service available whenever we need support,” said DeWitt.
Langfield added that new clients are often grateful for the speed and reliability of the service Armanino provides by using Avalara. “They come to us overwhelmed by this burden, and we’re able to take it off their hands. You can see their relief.”
Increased Demand for 1099 Services
DeWitt and other tax experts expect many more businesses of all sizes will need greater assistance with 1099 compliance services due to recent changes in reporting requirements. Over the past few years, the IRS has added Form 1099-NEC, lowered the threshold for reporting payment amounts, and lowered the number of filed forms that trigger the e-filing requirement.
Additionally, the requirement for filing form 1099-K, most often associated with online marketplaces, payment apps and settlement organizations, has dropped from $20,000 to $5,000. This is affecting a high number of online sellers and resellers. The IRS plans to lower this threshold to $2,500 for 2026, and possibly down to $600 starting in 2027, which would affect an even greater number of low-volume and hobbyist sellers.
He noted that the IRS now requires that any entity that files 10 or more of any type of form 1099 is now required to file electronically. And to do so, the entity must have a TCC filing code, but that process is also getting more complicated. For businesses that wait until the end of the year, this can result in receiving the TCC code after the IRS deadline, as well as other challenges. Avalara’s 1099 system also offers W-9 management functions that enable firms to create a year-long compliance process that ensures data accuracy and further streamlines the 1099 process.
“The key to making January as easy as possible is to do the work before January, to make sure that all your ducks are in a row prior to getting to that point,” Langfield said of the W-9 capabilities. “So, we always tell people: If you wait until December, you might be fine, but it’s not guaranteed. At that point, it’s the holidays, the beginning of a new year, and processing needs to start immediately. It’s probably going to be too late to get the information that you need.”
Key Takeaways:
- In 2025 (for tax year 2024), any organization filing 10 or more of any combination of varieties of Form 1099 must file these forms electronically. Failure to do so can result in penalties.
- In 2025 (for tax year 2024), the 1099-K reporting threshold was lowered to $5,000 from $20,000. Starting in 2026 (for tax year 2025), the IRS plans to lower the reporting threshold for form 1099-K from $2,500, and possibly to $600 the following tax year.
- Firms need to adopt an automated 1099 compliance system to be able to handle the dramatic increase in form filings, increase accuracy, and relieve their clients of this burden.
- Adopting a W-9 management system further enhances data accuracy and speeds filing, while encouraging more active client engagement.
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*“Armanino” is the brand name under which Armanino LLP and Armanino Advisory LLC, independently owned entities, provide professional services in an alternative practice structure in accordance with law, regulations, and professional standards. Armanino LLP is a licensed independent CPA firms that provide attest services, and Armanino Advisory LLC and its subsidiary entities provide tax, advisory, and business consulting services. Armanino Advisory LLC and its subsidiary entities are not licensed CPA firms.
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Tags: Income Taxes, IRS, Taxes
