Why 1099 Season Is About To Break Most Finance Teams

The Automation Gap Is Huge

Avalara surveyed 1,000 accounts payable professionals and uncovered a stat that should worry every CFO. Only 24 percent of companies have automated their 1099 process. Nearly the same number still rely on mostly or fully manual workflows. Think chasing W-9s, copy-pasting TINs and dragging CSV files into e-filing portals at midnight.

Despite this, 78 percent plan to invest in compliance tools next year and 71 percent say AI will influence their tech decisions. The appetite is there. The tools exist. But adoption is slow.

January Is Going To Hurt

Large filers know what’s coming. Companies issuing ten thousand or more 1099s expect to spend over one hundred hours on prep alone. Even midsize companies still burn forty plus hours manually sorting vendor data. With tighter budgets and more IRS scrutiny, teams are stretched thin and making mistakes they can’t afford.

Burnout isn’t a side note. It’s the main plot.

Nobody Knows the Rules

Only 35 percent of respondents feel confident they understand the current or upcoming 1099 reporting thresholds. When tax teams don’t know which forms they’re responsible for, they either overfile or underfile. Both options can trigger penalties or audits.

IRS communication hasn’t kept up with the complexity. And AP teams are paying the price.

Why AI Is About To Take Over 1099 Filing

Avalara’s leadership says we’re entering a new era of tax compliance. Agentic AI can now validate vendor data, flag mismatches, fill forms, automate deadlines and eliminate repetitive keystrokes. Instead of teams fixing the same TIN errors five different times, AI can catch them instantly.

Simpler, faster, less risky.
It’s the first real path out of the manual 1099 nightmare.

The Biggest Pain Points AP Teams Reported

Vendor information collection

Fifteen percent said simply getting vendors to send accurate info is their biggest obstacle.

Data validation

Thirteen percent struggle most with cleaning errors before filing.

TIN mismatches

Sixty percent said that up to ten percent of their filings include TIN and name mismatches. These errors are audit magnets.

IRS clarity

Thirty one percent want clearer guidance, earlier deadlines and more predictable threshold updates.

FAQ

Why do 1099 filings cause so many errors
Because most companies rely on manual data entry and slow vendor coordination.

What filings cause the most headaches
Forms with TIN mismatches, incomplete vendor info and late corrections.

Do companies need automation
Maybe not legally, but practically yes. Filing volume and penalties keep rising.

How big of a role will AI play
AI will likely become the default way AP teams validate and file forms over the next two years.

Summary

Most businesses are walking into 1099 season with outdated tools and no safety net. Manual reporting is slow, fragile and expensive. With IRS pressure rising and thresholds shifting, the companies that embrace automation and AI early will avoid penalties, reduce burnout and finally get ahead of tax season’s most chaotic month.