Approximately three-quarters of businesses haven’t yet automated their 1099 information reporting for their taxes, according to a new report from Avalara.
The survey, released Thursday, polled 1,000 accounts payable professionals, and found that only 24% have fully automated tax compliance, while 22% rely on mostly or entirely manual processes. In addition, 78% of the respondents said they plan to invest in compliance next year, while 71% say that AI innovation will influence their technology decisions..
Accounts payable leaders are getting ready for a rough January when they start to send out 1099 forms, especially larger filers (with more than 10,000 Forms 1099), who expect to spend over 100 hours on manual preparation alone. Most companies still spend over 40 hours. With stricter budgets and greater audit scrutiny, manual work is leading to unnecessary risks and a great deal of burnout, according to the report.
Only 35% of the respondents feel confident they understand current and upcoming reporting thresholds.
“We’re entering a new era of tax compliance, and the demands of 1099 reporting have outgrown manual processes,” said Kevin Halverson, general manager of accelerator businesses at Avalara, in a statement. “Agentic AI is transforming how finance teams operate by cutting errors, speeding up workflows, and giving businesses the confidence to file accurately and on time.”
Each January, millions of companies race to prepare and file 1099 forms before IRS deadlines. Every inaccurate form or delayed submission increases the risk of penalties, additional scrutiny, and strained vendor relationships. As teams prepare for the busiest filing period of the year, the report highlights five key insights shaping the upcoming 1099 season, including:
Unclear IRS communication is creating confusion, with 31% of respondents urging agencies to provide more timely and detailed guidance on requirements and deadlines.
Collecting vendor information was cited as the biggest challenge by 15% of the respondents, while 13% cited data validation and fixing errors as their top pain point, and 60% reported frequent Taxpayer Identification Number and name mismatches in up to 10% of their filings.
