Most Businesses Still Rely on Manual 1099 Processes Despite Rising Compliance Risk, Avalara Finds

Survey of 1,000 accounts payable professionals uncovers outdated processes, growing IRS complexity, and slow automation adoption heading into the upcoming filing season

DURHAM, N.C., Dec. 4, 2025 /PRNewswire/ -- Avalara, Inc., the agentic tax and compliance leader, today released the 2025 Avalara 1099 Readiness Report, an in-depth study outlining the key challenges accounts payable (AP) teams face heading into the 1099 season. Based on a survey of 1,000 AP professionals across the United States, the findings show that outdated workflows, increasing IRS requirements, and heightened audit scrutiny are putting mounting pressure on finance teams.

• Download the 2025 Avalara 1099 Readiness Report here.

The report reveals that only 24% of businesses have fully automated tax compliance, while 22% still rely on partial or entirely manual processes. As a result, many AP teams remain burdened by spreadsheets and manual data entry at a time when speed, accuracy, and governance are critical. Despite these gaps, momentum for modernization is growing, with 78% of teams planning to invest in compliance technology within the next year.

"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. "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:

• 1099 season is a major resource drain – U.S. companies spend an average of 40 hours each January on 1099 compliance. For large organizations or those filing more than 10,000 forms, the workload often surpasses 100 hours.
• Compliance complexity is fueling uncertainty – Unclear IRS communication continues to create confusion, with 31% of respondents urging agencies to provide more timely and detailed guidance on requirements and deadlines.
• Data quality is an ongoing pain point for AP professionals – Accurate reporting relies on strong data quality. Collecting vendor information (15%) and resolving Taxpayer Identification Number (TIN) and name mismatches (13%) remain the most significant obstacles for AP teams.
• Leaders show high interest in automation, but adoption still lags – Nearly 78% of AP leaders plan to invest in compliance solutions in the next 12 months, and 71% say that AI innovation will influence their technology decisions. However, only one in four businesses have fully implemented an end-to-end automated system.
• Agentic AI is redefining tax and compliance – Manual processes expose organizations to unnecessary risk and limit operational efficiency. Agentic AI reduces this burden by automating repetitive tasks, improving data integrity, and supporting smooth, compliant filing.

About the 2025 Avalara 1099 Readiness Report
The 2025 Avalara 1099 Readiness Report was conducted by Censuswide among 1,000 accounts payable professionals in the U.S. aged 18 and older. The data was collected between October 31 and November 11, 2025. Censuswide abides by the Market Research Society Code of Conduct and ESOMAR principles and is a member of the British Polling Council.

About Avalara
Avalara is the agentic tax and compliance leader. For more than two decades, Avalara has built one of the industry's most expansive libraries of tax content and integrations, supporting more than 43,000 businesses and government entities across more than 75 countries. Its purpose-built AI agents automate end-to-end compliance processes with precision, including tax calculation, filing, e-invoicing, and exemption management. For more information, visit www.avalara.com.

SOURCE Avalara, Inc.