As the 2025 tax reporting season approaches, financial institutions are preparing for one of the most significant updates in recent years to the IRS’s information reporting framework.
The U.S. tax authority has released updated versions of Publication 1220 and Publication 1187, which provide detailed guidance for electronic filing of key information returns such as Forms 1099 and 1042-S, claims TAINA Technology.
The latest changes form part of the IRS’s broader push toward modernisation and digital efficiency. For many financial institutions, these updates mark a turning point in how compliance and reporting processes must be managed.
A major shift comes with Treasury Decision (TD) 9972, which substantially lowers the threshold for mandatory electronic filing. From 2025 onwards, any filer submitting 10 or more information returns must do so electronically.
This applies across several filing systems, including FIRE (Filing Information Returns Electronically), IRIS (Information Returns Intake System), AIR (Affordable Care Act Information Returns), and SSA systems for W-2 filings.
These new requirements affect both Publication 1220—covering forms such as 1097, 1098, 1099, 3921, 3922, 5498, and W-2G—and Publication 1187, which relates to Form 1042-S. The change is expected to significantly increase the number of entities required to file electronically, placing greater pressure on firms to update their systems and procedures.
Another key update is the planned retirement of the long-standing FIRE system. Beginning with the 2026 tax year (filing season 2027), the IRIS platform will replace FIRE entirely as the primary system for filing information returns. To prepare for this, institutions must apply for a Transmitter Control Code (TCC) via the IRIS portal—a step that should be completed well before the transition deadline.
Smaller but important form-level adjustments have also been introduced. A new Distribution Code “Y” has been added to Form 1099-R to denote Qualified Charitable Distributions (QCDs), while Form 1099-Q now includes Code “2” to report Qualified Tuition Program (QTP) to Roth IRA transfers.
The IRS’s digital transformation aims to streamline reporting, reduce paper dependency, and enhance data accuracy. For financial institutions, however, this also means adapting quickly to meet the new requirements. The lower e-filing threshold will impact many filers who previously submitted paper returns, while the move to IRIS requires new technical integrations, process realignment, and employee training.
Failure to comply could result in penalties unless a waiver is granted. Therefore, proactive preparation is essential to mitigate compliance risk and maintain reporting accuracy.
Financial institutions should start by aggregating all reportable forms under the same Taxpayer Identification Number (TIN) to determine whether they meet the 10-return e-filing threshold. They should apply for a TCC via IRIS by 1 November 2025 and run test submissions to confirm system compatibility. Internal teams—particularly compliance and IT—should collaborate closely to ensure a seamless transition to IRIS.
Copyright © 2025 RegTech Analyst
Copyright © 2018 RegTech Analyst
