With the FIRE (Filing Information Returns Electronically) system retiring at the end of 2026. Tax year 2025 returns, filed by December 31, 2026, are the last that can go through FIRE, while tax year 2026 returns, due in the 2027 filing season, must go through the new IRIS (Information Returns Intake System) instead. Businesses should be aware of the new, rigid requirements and regulations.
Here’s What’s New
- Information returns will be electronically filed to the IRS through the IRIS web portal, where structured formatting will be critical. Larger-volume filers (100 or more returns) must submit data as structured XML files through IRIS’s Application-to-Application (A2A) system; smaller filers can enter data manually or upload a CSV file through the IRIS Taxpayer Portal instead.
- Rather than lumping entire name strands into one field, the XML file will mandate a strict separation of first, middle, and last names, and suffixes (such as Jr., Sr., or III), when inserting taxpayer information to ensure cleaner data management.
- The new XML schema includes a separate field to specify the TIN type (SSN, EIN, or ITIN).
- Real-time validation on TIN/Name matching upon submission, rather than delayed CP2100 or CP2100A notices. A TIN mismatch now shows up immediately as an “Accepted with Errors” status on the web portal instead of surfacing weeks or months later.
- The new IRIS web portal automatically tracks and stores on record filed information returns to incentivize employer self-accountability, and allows payers to download copies to be sent off to recipients within the portal system.
The Problems the New IRIS System Poses for Businesses
- Heightened risk of receiving rejections on files prior to the information return deadline, thus increasing the likelihood of late filing penalties if not addressed
Businesses that tend to procrastinate filing information returns run the risk of being subjected to late filing penalties if they fail to identify and address unforeseen errors on near-overdue files. As a result, there is an emerging incentive for businesses’ tax departments to review XML files prior to submission to identify elusive mistakes that may trigger rejections or acceptances with errors, avoiding this unfavorable situation — an excessively time-consuming process that requires thousands of individual 1099 forms to be closely examined.
- Stricter XML schema mandates database and software reworking
Due to the parsing of employee/contractor names and the indication of TIN variation, errors are likely to arise for businesses accustomed to the ASCII format of FIRE, causing staff accountants to be flooded with manual corrections. Moreover, if error detections on submitted information returns repeatedly arise, businesses will be required to extensively modify their database to fit within the framework of the new XML schema and likely rework internal software.
- The easily interpretable format of XML files for the IRS enables more precise monitoring of information return compliance, increasing the frequency of IRS penalty notices and correction requests
As a result of the standardized formatting, the IRS can more easily identify inconsistencies between reported incomes on tax returns and reported payments on information returns, resulting in a higher probability of notices on unresolved returns and penalties for unsubmitted returns. As a result, tax departments are increasingly tasked with responding to said notices and diligently tracking the number of filed returns, in addition to revising rejected files, exacerbating administrative burden. Moreover, the IRS’s overall sensitivity to discrepancies further emphasizes the need for employers to accurately record payments made to contractors/employees and improve data clarity.
How SPSGZ Offers Assistance to Ensure a Streamlined Process
- SPSGZ offers state-of-the-art software that can readily convert data stored in templates into IRS-formatted XML files to help alleviate the strain placed on businesses while navigating and adapting to the changes presented by the IRIS system. In addition to reformatting provided data, our software can detect and correct invalid information/errors prior to filing and submission to save you from the hassle of addressing unwanted notices or rejections.
- Integrated into our self-developed software is an intelligent name parsing tool that can efficiently split full name strings into individual fields in conformity with the XML schema so as to prevent unintentional rejections. In addition to these functions, SPSGZ’s software also helps classify recipient designations (whether they are an individual or an entity) to ensure accuracy when inputting TIN variations, especially in tricky cases where the business affiliation of a hired contractor is unclear.
- If errors are reported post-submission due to the sharing of invalid data or incorrect formatting, via notices, SPSGZ will pinpoint and correct those mistakes for you, relieving you from the duty of responding to such notices, which can require extensive time and resources.
SPS/GZ is a full-service tax reporting firm that includes 1099 online filing services. Known for personalized service and exceptional support, while utilizing state-of-the-art technology, we create and e-file various 1099s, Forms 1098, 1098-T and 1042-S, Affordable Care Act tax forms, and Forms 3921 and 3922 for clients of all sizes. To avoid risk and avoid IRS penalties, TIN Matching is a service that SPS/GZ provides for our clients. For more information, reach out to us at sales@greenzapato.com or call us at (888) 375-3049. Our complete and affordable solution allows administrators to simply upload their tax form data file to our secure portal in a few simple steps, and we handle everything else to keep your organization compliant. Contact us today!
