IRIS (Infrared Imaging Spectrograph) is the near-infrared (0.81 µm to 2.4 µm) diffraction-limited imager and integral field spectrograph (IFS) designed for the Thirty Meter Telescope (TMT) and the Narrow-Field Infrared Adaptive Optics System (NFIRAOS). The imager will have a 34 arcsec x 34 arcsec field of view with 4 milliarcsecond (mas) sampling. The IFS consists of a lenslet array and a slicer, enabling four plate scales from 4 mas to 50 mas, with multiple gratings and filters. We will report the progress on the development of the IRIS Data Reduction System (DRS) in the final design phase. The IRIS DRS is developed in Python with the software architecture based on the James Webb Space Telescope science calibration pipeline (stpipe). We are developing a library of algorithms as individual Python classes that can be configured independently and bundled into pipelines. The IRIS DRS will interface with the TMT observatory software and will operate in real-time and as a stand-alone public package for offline reduction. The IRIS DRS also includes a C library for readout processing that is used for both real-time processing and post-processing. Lastly, we will discuss development of the IRIS simulation package that simulates raw spectra and imager readout-data from the Teledyne Hawaii-4RG detectors, which are used to test and develop reduction algorithms.