As financial institutions gear up for the 2025 tax reporting season, the regulatory landscape is undergoing significant transformation.
The Internal Revenue Service (IRS) has released updated versions of Publication 1220 and Publication 1187, which define the technical requirements for electronically filing information returns such as Forms 1099 and 1042-S, claims TAINA Technology.
With these updates, the agency is accelerating its modernisation drive—requiring institutions to adapt swiftly to maintain compliance.
The most notable update for 2025 is the reduced threshold for mandatory electronic filing, introduced under Treasury Decision (TD) 9972. Now, any filer submitting 10 or more information returns must file electronically. This applies across various filing systems, including FIRE (Filing Information Returns Electronically), IRIS (Information Returns Intake System), AIR (Affordable Care Act Information Returns), and the SSA for W-2s. The change affects both Publication 1220—covering forms such as 1097, 1098, 1099, 3921, 3922, 5498, and W-2G—and Publication 1187, which covers Form 1042-S.
Another major shift is the planned retirement of the long-standing FIRE system. Beginning in Tax Year 2026 (Filing Season 2027), the IRIS platform will become the IRS’s sole filing system for information returns. Financial institutions are encouraged to begin transitioning early by applying for a Transmitter Control Code (TCC) through the IRIS portal to ensure continuity and readiness.
Form-specific updates have also been introduced for 2025. Form 1099-R now includes a new Distribution Code “Y” to report Qualified Charitable Distributions (QCDs), while Form 1099-Q features a new Code “2” for Qualified Tuition Program (QTP) transfers to Roth IRAs. These adjustments underscore the IRS’s efforts to increase transparency and ensure accurate data capture across a growing range of financial transactions.
Behind these changes lies the IRS’s broader goal of streamlining operations, improving accuracy, and reducing paper dependency. For financial institutions, however, this modernisation brings heightened compliance obligations. The lowered e-filing threshold means that many organisations accustomed to paper submissions must now digitise their reporting processes. The transition to IRIS also requires technical preparation, system testing, and cross-departmental coordination. Non-compliance may lead to substantial penalties for institutions that fail to meet electronic filing mandates without an approved waiver.
To prepare, financial institutions should start by evaluating their total filing volumes across all forms and entities under the same Taxpayer Identification Number (TIN). Those submitting 10 or more returns must file electronically. Applying for a TCC via the IRIS system by November 1, 2025, is a key step to avoid delays. Testing systems in advance, updating internal compliance procedures, and ensuring all relevant teams and service providers are aligned are also critical to a smooth transition.
TAINA, a leading RegTech company specialising in tax reporting automation, continues to support financial institutions through this evolving landscape. Its fully automated FATCA, CRS, and QI validation platform helps clients strengthen data integrity, minimise manual effort, and achieve real-time regulatory compliance.
TAINA said its mission is to empower financial institutions to stay ahead of regulatory change with confidence. The company’s tools enable firms to streamline onboarding tax form validation, improve reporting accuracy, and adapt seamlessly to new IRS requirements. As the agency advances its digital transformation, TAINA remains a trusted partner for institutions navigating these complex shifts.
Find more on RegTech Analyst.
Copyright © 2025 FinTech Global
