If you handle vendor payments, contractor reporting, or information returns, 2026 brings some of the most meaningful 1099 changes in years. Between IRS system transitions, new digital transaction rules, and expanded cross-border reporting issues, many organizations and tax professionals are facing increased complexity and increased risk.
Here are the five most important 1099 and information return changes you should understand now to avoid costly mistakes and stay ahead of IRS expectations.
1. The IRS Is Phasing Out FIRE and Moving to IRIS
One of the biggest operational changes is the IRS’s plan to shut down the legacy FIRE (Filing Information Returns Electronically) system and transition filers to IRIS (Information Return Intake System).
While FIRE has been in place since the 1980s, the IRS has made it clear that IRIS is the future. The updated IRS instructions now reference IRIS far more frequently, and FIRE is expected to be retired based on current IRS timelines.
What this means for you:
- New filing workflows may be required
- IRIS has different upload limits and file formats
- Application-to-Application (A2A) filing may be needed for larger volumes
- Third-party vendors must also support MeF for certain forms
If you’ve relied on FIRE for years, this transition alone can create filing delays and technical headaches if you’re not prepared.
2. The 1099 Reporting Threshold Is Increasing, But Not for Everything
The general 1099 reporting threshold is changing from $600 to $2,000 for 2026, but this does not apply to all payment types.
Included in the new $2,000 threshold:
- Contract labor
- Rent
- Other income
- Medical and healthcare payments
Still excluded from the new threshold:
- Royalties (still $10)
- Gross proceeds paid to attorneys (still $600)
- Certain legal settlement payments
Many filers assume the new threshold applies universally, but misapplying it can lead to under-reporting or over-reporting.
3. Digital and Cloud Transactions (Including SaaS) Are Now Clearly Defined
The updated regulations now clearly define digital transactions, with cloud transactions (including SaaS) treated as a major subset.
Digital transactions fall into four categories:
- Transfer of a copyright right
- Transfer of a copyrighted article
- Provision of services
- Provision of know-how (trade secret-type information)
For cloud transactions and SaaS, the default treatment is now:
Provision of services (contract labor)
Why this matters:
- U.S. SaaS providers may require W-9s and potentially 1099-NEC
- Corporate and credit card exceptions may apply for U.S. providers
- Foreign SaaS providers create major sourcing and Form 1042-S issues
This is one of the most misunderstood areas of modern 1099 reporting — and a major source of IRS exposure.
4. Form 1042-S Is a Growing Risk Area for Cross-Border Payments
If you pay foreign vendors or service providers, Form 1042-S rules are becoming more critical, especially with cloud and digital services.
Key realities of Form 1042-S:
- No dollar threshold
- No corporate exception
- No credit card exception
- Typical withholding rate of 30%
- Sourcing depends on where services are performed
For cloud and SaaS transactions, determining where services are performed can be unclear, creating real compliance challenges.
Many organizations don’t realize they even have Form 1042-S exposure until an IRS inquiry, making this one of the highest-risk areas in modern information return reporting.
5. Electronic Delivery of 1099s Has Strict Rules (Email Alone Isn’t Enough)
Many organizations email PDFs of 1099s without realizing that electronic delivery requires specific regulatory steps.
Electronic delivery rules include:
- Affirmative recipient consent
- Required format, posting, and notification procedures
- Ongoing access requirements
- Publication 1179 guidance
While email may be permitted in practice, the IRS rules go far beyond simply attaching a PDF. Failing to follow these rules can create technical noncompliance — even if recipients received their forms.
Bonus: Draft W-9 Changes Could Impact Vendor Records
As of January 29, 2026, draft Form W-9 guidance proposes:
- SSN-only for sole proprietors (no EINs)
- Increased focus on identifying the valid owner of income
- Potential need to re-solicit W-9s from certain vendors
If finalized, this could require widespread updates to vendor files and onboarding processes.
Stay Ahead with In-Depth Training
These changes from the IRIS system transitions to SaaS treatment, Form 1042-S exposure, electronic delivery rules, and draft W-9 updates are all covered in detail in our course:
2026 Smart 1099 Reporting Practices & Updates
This course walks through real-world scenarios, updated IRS guidance, and practical steps to help you:
- Adapt to IRIS and FIRE changes
- Apply digital and cloud transaction rules correctly
- Identify and manage Form 1042-S exposure
- Implement compliant electronic delivery processes
- Prepare for draft W-9 changes and vendor documentation risks
If you’re responsible for 1099 reporting or advising clients on information returns, this course provides the clarity and practical insight needed to navigate today’s evolving requirements with confidence.
Sources & References
- IRS — Information Returns Intake System (IRIS)
- IRS — Publication 1220 (Specifications for Electronic Filing)
- IRS — General Instructions for Certain Information Returns
- IRS — Instructions for Form 1042-S
- IRS — Publication 1179 (Electronic & Substitute Forms Rules)
- IRS — Filing Information Returns Electronically (FIRE)
- IRS — Electronic Reporting & E-File Regulations (Taxpayer First Act)
