Do 1099s Have to Be Filed Electronically?

Businesses use the Form 1099 series to report various types of non-employee income to the Internal Revenue Service (IRS), including payments to independent contractors, interest, and dividends. The method for submitting these forms is governed by specific regulations, and understanding whether you must file electronically or can submit them by mail is a fundamental compliance question.

The Electronic Filing Threshold

The requirements for filing information returns have undergone a significant change. For returns filed in 2024 and beyond, the IRS mandates electronic filing for those who submit 10 or more information returns in aggregate during the year. This is a substantial reduction from the previous threshold of 250 forms per type of return. This new, lower threshold means many small businesses that previously filed by paper are now required to file electronically.

Determining Your Total Form Count

To determine if you meet the 10-form threshold, you must combine the total number of all information returns you are required to file within the calendar year. The forms that must be aggregated include:

• The entire Form 1099 series
• Forms W-2
• Form 1098
• Form 3921
• The Form 5498 series

For example, a small business with five employees and five independent contractors would file five Forms W-2 and five Forms 1099-NEC. The total count is 10, which meets the threshold and requires the business to file all forms electronically. If that business also paid a law firm, it would issue a Form 1099-MISC, bringing the total to 11 returns.

How to File Electronically

For businesses that meet the 10-form threshold, the IRS provides a free online portal called the Information Returns Intake System (IRIS). This system is particularly useful for smaller businesses that may not have dedicated tax software. The IRIS portal allows for forms to be entered one by one or for a user to upload a .csv file to populate data for multiple forms at once.

The system also allows for the submission of automatic extensions and can save payer and recipient information from year to year. Beyond the free IRS portal, many businesses use third-party tax and accounting software that often integrates with payroll systems to streamline the process.

Filing by Mail

If your business is required to file fewer than 10 total information returns, you retain the option to file by paper. This method involves sending the physical, scannable “Copy A” of each Form 1099 to the IRS. These are not copies that can be downloaded from the IRS website; they must be the official, scannable versions which can be ordered.

When submitting paper forms, you must also include Form 1096, Transmittal of U.S. Information Returns. A separate Form 1096 must be prepared for each distinct type of information return being filed, such as sending one Form 1096 with all 1099-NECs and a second with all 1099-MISCs.

Penalties for Not Filing Electronically

Failing to file information returns electronically when required can lead to financial penalties from the IRS. The penalty amount depends on when the correctly formatted return is submitted. For returns due in 2025, the penalty starts at $60 per form if corrected within 30 days of the due date. It increases to $110 per form if corrected after 30 days but before August 1, and rises to $330 per form after that date. If the IRS determines the failure was due to intentional disregard, the penalty is significantly higher, starting at $660 per form with no maximum limit.

A business can request a waiver from the electronic filing mandate by submitting Form 8508, Application for a Waiver From Electronic Filing of Information Returns. The primary reason the IRS grants such a waiver is for undue financial hardship, which the filer must prove. This requires submitting at least two cost estimates demonstrating that the expense of e-filing is prohibitive compared to paper filing.