This will be the final year that the Internal Revenue Service will be accepting returns on its Filing Information Returns Electronically system before fully transitioning over to its new Information Returns Intake System, or IRIS. Most accounting firms rely on third-party providers for these purposes and so are unlikely to notice the change, but behind the scenes, those same third-party providers have been working very hard to ensure the transition runs smoothly so that practitioners can continue to not notice the change.
The IRS's FIRE system has been around since the 1980s. Wendy Walker, vice president of regulatory affairs for tax compliance solutions provider
In contrast, the IRIS system has more of a portal-based API-first architecture, which needs no special software and allows for a greater range of applications. For instance, while files formatted for FIRE were not human-readable, IRIS files are: "I can look right in there, CTRL+F, find your 1099 and see it right there in the file," Walker explained.
Further, while the FIRE system was very much tied to individual forms, the new IRIS system works more granularly, and so can do things like recognize that a name and TIN on a 1099 are the same as that on a 1040 and so can cross-reference the information to check for errors. She added that an API-based system also means feeds can be set up so there is no need to upload files manually.
Getting ready for the transition has required a lot of work and expense. Sovos, she said, supports 41 different information returns, and before the shift was announced they had been coded for FIRE. The new system has unique schemas for each form, and so Sovos needed to retrofit and test each one with the IRS before getting approval for filing and production. Recoding these forms also meant recoding all the software that was connected to them. Considering how many solutions Sovos offers, this was not a simple process.
"We've got solutions that span from small businesses all the way up through the global enterprise market, so that means it isn't just one solution we're retrofitting. We had to create a filing and transmission [system] that was more platform style, and then have all our applications feeding into that to be able to do this more at scale. [And] certainly we have to build new file formats, to build out an API, and we had to have resources to test that," she said.
Sovos filed its first set of returns through the new IRIS system in 2024, beginning with 2.5 million returns. This year they've pushed through about 6 million so far.
Kimberlee McKenna, director of product for payroll and workforce management at
"To prepare for the transition, our teams have focused on supporting IRS IRIS requirements by ensuring XML readiness, implementing schema validation, and updating workflows to align with the IRS's real-time validation model. We're also closely continuing to monitor IRS guidance and timelines to ensure customers can transition without disruption during the current overlap period when FIRE and IRIS coexist, and additional changes will be made as states make their transitions from the older FIRE file format to the new IRIS file format," she said in an email.
The irony of the overlapping names is not lost on the company. McKenna said it has led to some confusion, but also some amusement.
"The name overlap is entirely coincidental, but it has led to some understandable confusion, and a few laughs. We've had more than a couple of moments where we've had to clarify which IRIS we're talking about. Only one of them is part of the federal government, and it's not us. This moment underscores how important clarity and communication are as tax infrastructure modernizes and highlights how closely employers, technology providers, and regulators are now intertwined," she said.
Worth the trouble?
McKenna understood that transitioning to a new system has introduced some short-term challenges, but ultimately welcomed the move.
"While the shift introduces near-term complexity, it ultimately improves validation, accuracy, and scalability through XML-based filing and more real-time feedback," she said.
Ariege Misherghi, general manager and senior vice president of the AP, AR and accounting channel for payments solutions provider
"The change to IRIS is a most welcome API-based approach to filing. It removes human error and many system limitations from the FIRE solution, which required users to do things like truncate names in order for fields to fit in the FIRE format. FIRE and IRIS have been running in parallel for some time, and we chose to use FIRE through TY25 to give IRIS time to mature. We're looking forward to using IRIS next tax year," she said.
Walker from Sovos noted that most practitioners rely on third-party software for their needs in this area and so likely won't notice anything different — unless, of course, their vendor has not done the prep work necessary to make the change. Then things will become very noticeable.
"Because it's a change to their process: If I've always issued my 1099s this way, and now, all of a sudden, after 10 years, the IRS is rejecting my file because [it is formatted for FIRE], it could require a change in their system or in their process in some way that certainly would be an expense," she said. "It's a huge customer experience thing. And we wanted to make sure that we could do this as seamlessly as possible for our customers, because this coming year is going to be definitely bumpy," she said.
