The 1099 Problem Isn't Standing Still — It's Accelerating
Every January, CPA firms brace for the same storm: hundreds — sometimes thousands — of 1099s to process, a hard IRS deadline looming, and a staff that's already buried under year-end work. Most firm partners accept this as an unavoidable cost of doing business. They shouldn't.
The reality is that 1099 season isn't just painful — it's getting measurably worse year over year. The volume is rising. The rules are expanding. The penalties are steeper. And the staff available to absorb the workload isn't growing fast enough to keep pace. Firms that treated 1099 processing as a manageable nuisance five years ago are now watching it consume entire billing cycles, strain client relationships, and push junior staff toward burnout before Q2 even begins.
This isn't a staffing problem you can hire your way out of, and it isn't a workflow problem you can solve with a better spreadsheet. It's a structural problem — and understanding why it keeps getting worse is the first step toward actually fixing it.
Volume Is Climbing, and It's Not Slowing Down
The IRS processed over 1.1 billion information returns in a recent filing year. That number has grown consistently for more than a decade, and the trend line isn't flattening. Several forces are driving it upward simultaneously.
First, the gig economy has exploded the number of 1099-NEC recipients in circulation. Businesses that once had a handful of independent contractors now have dozens — or hundreds — spread across project management platforms, staffing apps, and freelance marketplaces. Each one of those relationships generates a filing obligation, and many of your business clients are still tracking these relationships manually in spreadsheets or, worse, in their heads.
Second, investment activity among your client base generates 1099-DIV and 1099-INT filings that compound the workload. As more individuals hold brokerage accounts, dividend-paying ETFs, and high-yield savings instruments, the number of informational forms touching your desk each season grows accordingly — even when your client count stays flat.
Third, Congress and the IRS have shown no inclination to simplify the 1099 ecosystem. If anything, the trajectory points toward more form types, lower reporting thresholds, and tighter compliance windows — not fewer.
For a mid-sized CPA firm processing 1099s for 80 to 150 business clients, that volume translates directly into hours. Conservative estimates put manual 1099 processing time — data gathering, entry, TIN verification, corrections, and filing — at 45 to 90 minutes per client when you account for back-and-forth communication and error resolution. At scale, that's easily 150 to 225 staff hours consumed in a four-to-six week window that's already your busiest period of the year.
The Error Rate Problem Is Worse Than Most Firms Realize
Manual data entry errors on 1099 filings aren't just embarrassing — they're expensive. The IRS penalty structure for incorrect information returns starts at $60 per form for corrections filed within 30 days and escalates to $310 per form for intentional disregard. For a firm filing a few thousand 1099s across its client base, even a modest 2% error rate on TIN mismatches, incorrect amounts, or wrong form types can generate penalty exposure well into five figures.
The most common failure point is TIN and EIN verification. A vendor provides a slightly different name than what's on file with the IRS. A client inputs a transposed digit. A sole proprietor uses their personal SSN for some transactions and their EIN for others. These discrepancies don't always surface until the IRS sends a B-Notice — sometimes months after the filing deadline — forcing your team to revisit work that was supposed to be finished and creating awkward conversations with clients who thought the matter was closed.
EIN mismatch detection is one of the most time-consuming parts of the verification process precisely because it requires cross-referencing data across sources that weren't designed to talk to each other. Firms that have invested in automating this specific step report significant reductions in downstream corrections and IRS notices — which is why it's become a focal point for 1099 automation tools built for accounting practices.
Regulatory Complexity Is Compounding the Workload
The 1099 landscape has never been simple, but the last several years have added meaningful new layers of complexity that didn't exist before.
The reintroduction of the 1099-NEC in 2020 — after a nearly 40-year absence — forced firms to re-educate clients, update workflows, and manage the transition away from Box 7 on the 1099-MISC. That transition created confusion that still lingers in some client engagements. Clients who have been filing the same way for years don't always flag the change until you're already in the middle of processing.
The attempted expansion of third-party payment network reporting thresholds — down to $600 from $20,000 — created two consecutive years of IRS delays and contradictory guidance that left firms genuinely uncertain about what they were required to file. That kind of regulatory ambiguity forces firms into a defensive posture: over-communicating with clients, building in extra review time, and preparing for multiple contingencies. All of that takes hours that aren't billable at any meaningful rate.
Meanwhile, state-level 1099 filing requirements have grown increasingly fragmented. Many states now require direct filing rather than relying on the IRS Combined Federal/State Filing Program, and each state has its own thresholds, form requirements, and deadlines. Tracking these requirements across a client base that spans multiple states is a genuine compliance challenge — one that falls squarely on your team to manage.
The Staffing Equation Has Fundamentally Shifted
Here's the part that makes all of the above worse: the accounting profession is facing a well-documented talent shortage. AICPA data has consistently shown a decline in the number of candidates sitting for the CPA exam, and firms at every size tier are competing harder for a shrinking pool of qualified staff.
What does that mean for 1099 season? It means the people absorbing this growing workload are increasingly your most experienced — and most expensive — team members. When a senior associate or manager is spending 20 hours in January manually verifying TINs, chasing down vendor W-9s, and keying data into filing software, that's 20 hours that aren't going toward advisory work, tax planning, or client relationships that actually differentiate your firm.
It also means that the seasonal pressure of 1099 processing contributes directly to staff dissatisfaction. Repetitive, high-stakes data entry work isn't what people went into public accounting to do. Firms that haven't found ways to automate the most tedious parts of the process are implicitly asking their people to absorb work that feels beneath their skill level — at the exact moment of year when morale is already under the most strain.
The math on this is straightforward. If your firm bills out a senior associate at $150 per hour and that person spends 40 hours on 1099 processing that could be automated, you've absorbed $6,000 in labor cost on work that generates little to no additional revenue. Multiply that across multiple staff members and multiple seasons, and the number becomes a compelling case for change.
Why Firms Keep Absorbing the Pain Instead of Solving It
If 1099 season is this disruptive, why haven't more firms solved it? The honest answer is that the solutions available until recently weren't purpose-built for the way CPA firms actually operate.
Generic payroll platforms and financial software handle some 1099 functions, but they're designed for the businesses issuing the forms — not for the accounting firms managing filings across dozens or hundreds of clients simultaneously. The workflows are different. The error surfaces are different. The compliance requirements are different. Adapting tools built for one use case to serve another is how firms end up with brittle, custom workarounds that break at exactly the wrong moment.
Purpose-built automation for CPA firm 1099 workflows is a newer category, and adoption has been uneven. Some firms have experimented with it; others have been skeptical — reasonably so — about whether the technology was mature enough to trust with high-stakes filings.
That calculation is changing. Platforms like Kairos, which now supports both 1099-DIV and 1099-INT form automation alongside W-2 processing, are being built specifically around the operational realities of accounting practices — multi-client management, TIN verification, error detection, and deadline tracking — in ways that generic tools simply aren't. The question for firm partners is no longer whether automation exists, but whether they're ready to stop absorbing costs that don't have to be there.
The Firms That Fall Behind Now Will Feel It for Years
There's a compounding effect to solving — or not solving — the 1099 problem. Firms that build scalable, automated workflows this season process more clients with the same staff next season. They take on new business without proportionally increasing headcount. They free up senior time for higher-value advisory work. They reduce error rates and the client friction that comes with them.
Firms that don't make that investment absorb another year of the same pain — but with higher volume, stricter enforcement, and staff who are one brutal January away from updating their LinkedIn profiles.
1099 season is getting harder every year because the underlying forces driving that difficulty — volume growth, regulatory complexity, talent scarcity, penalty exposure — are all moving in the same direction at once. The firms that recognize this as a structural problem, not a seasonal inconvenience, are the ones that will still be growing in five years.
Kairos, built by Selah Systems, is an AI-powered W2 and 1099 tax automation platform designed specifically for CPA firms. It eliminates the manual processing burden, reduces errors, and scales with your practice — so your team can focus on work that actually moves the firm forward. If you're ready to see what that looks like in practice, request a demo and we'll show you exactly how Kairos works for firms like yours.