Welcome back to Exit & Equity, the email for serious self storage owners.
Today we're tackling the boring compliance task you've been avoiding and showing you how to handle it in under an hour.
Let’s go!
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IN THE KNOW
You have 23 days until the 1099-NEC deadline
It's January 14, 2026.
Here's a story that happens more than you think:
Self-storage operator pays property management company $18,000/year, lawn service $4,800/year, HVAC contractor $8,500/year. Never files 1099s because "nobody told me I had to."
Three years later, the lawn service gets audited by the IRS. They discover $14,400 in unreported income over 3 years that traces back to your facility.
The lawn service pays their penalty. Then the IRS asks them: "Who paid you this money?"
Now you're part of the audit.
Your exposure: $50 per unfilled 1099 minimum. But because you didn't file for 3 consecutive years, the IRS classifies it as "intentional disregard." The penalty jumps to $310+ per form.
Total: $2,790+ in penalties for three vendors over three years. Plus legal fees, CPA time, and the stress of an IRS audit.
For something you didn't even know you had to do.
The wake-up call: The IRS doesn't send reminders in December. They show up 2-3 years later with penalties and interest.
The deadline: January 31, 2026. If you paid any contractor, vendor, or service provider more than $600 in 2025, you probably owe them—and the IRS—a 1099.
Most self-storage operators don't know this. Here's everything you need to fix it before the clock runs out.
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WHO NEEDS A 1099 (THE RULES YOU PROBABLY DIDN'T KNOW)
The basic rule: If you paid someone $600 or more during 2025 for services, you likely need to issue them a 1099. This is federal law, not optional.
These require 1099s:
Independent contractors (property managers, consultants, maintenance contractors)
Sole proprietors
Single-member LLCs (unless they elected S-corp or C-corp taxation)
Partnerships
Lawyers (even if they're a corporation—special IRS rule)
Service providers: Landscapers, HVAC techs, plumbers, electricians, cleaning services, snow removal, pest control, gate repair, auction companies
Marketing agencies (if not incorporated)
Your bookkeeper (if paid as contractor, not employee)
These do NOT require 1099s:
Corporations (C-corps and S-corps)—except lawyers
Employees (they get W-2s, completely different)
Product purchases (Home Depot supplies = no 1099)
Credit card/PayPal/Venmo payments (processor handles 1099-K reporting)
Reimbursements (contractor bought materials, you reimbursed = doesn't count toward $600)
The $600 Threshold Works Like This:
Aggregate payments across the entire year.
Contractor did 3 jobs totaling $650 = 1099 required
Different contractor did 2 jobs totaling $590 = no 1099 needed
Track cumulative payments by vendor
Common Self-Storage Scenarios:
Property Management Company: Paid $12,000/year → 1099 required (unless incorporated)
Lawn Service: $400/month × 12 months = $4,800 → 1099 required
HVAC Contractor: Three service calls totaling $850 → 1099 required
Your Bookkeeper: $300/month = $3,600/year → 1099 required (if contractor, not employee)
Gate Repair Guy: Came once, charged $450 → No 1099 (under $600 threshold)
Attorney Fees: Paid $2,000 for lease review → 1099 required even if the law firm is a corporation
Software Subscriptions: Paid Storeganise $2,400/year → No 1099 (corporations are exempt)
How to Know for Sure:
The W-9 form (covered next) tells you their tax classification. If they checked "Corporation," you generally don't file a 1099. Exception: lawyers always get 1099s.
THE W-9: YOUR INSURANCE POLICY AGAINST IRS PENALTIES
What is a W-9?
A one-page IRS form where the contractor provides their legal name, business name, address, Tax ID number (EIN or SSN), and tax classification. Think of it as the vendor's "tax profile card" that tells you everything you need to know about how to report payments to them.
Here's the rule that will save you thousands in headaches:
Every time you hire a new company, contractor, or service provider, before you pay them dollar one, you get their W-9.
Not after the first payment. Not when they hit $600. Not in December when you're scrambling. Before the first check clears.
Why you absolutely need it:
You cannot file a 1099 without this information
If the IRS audits and you don't have W-9s on file, you have zero defense
It's your proof you attempted to comply with the law
When to collect it:
BEFORE you pay them the first time (ideal)
At minimum, before cumulative payments hit $600
Realistically right now: For everyone you paid in 2025 if you don't have them
How to Collect W-9s (Even If You're Starting in January):
The Process:
Download blank W-9 from IRS.gov (free, one page)
Email it to every vendor/contractor you work with (Script provided below!)
File it digitally (Google Drive folder "Vendor W-9s") or in paper files
You'll need this information every January for as long as you work with them
What If They Refuse?
Some contractors get weird about W-9s. They're either:
Hiding income from the IRS
Disorganized and don't understand it's standard
Confused about what it means
IRS rule: If they refuse, you're supposed to withhold 24% "backup withholding" from their payments.
Practical reality: Most operators stop working with vendors who won't provide W-9s. Too much hassle and risk.
The January 2026 Problem:
You already paid vendors throughout 2025. You don't have W-9s. What now?
Solution:
Send W-9 request RIGHT NOW with urgent subject line
Explain: "I must file your 1099 by January 31st. Without your W-9, I can't file correctly and we'll both have IRS problems."
Most will comply when they understand it's IRS-related
If they ghost you: File with the information you have (name, address from past invoices). Incomplete is better than not filing at all.
HOW TO FILE (THE ACTUAL PROCESS)
You have your vendor list. You have W-9s (or are collecting them frantically). Now what?
Step 1: Gather Your Data
What you need for each 1099:
Recipient's legal name (from W-9)
Recipient's address (from W-9)
Recipient's Tax ID—EIN or SSN (from W-9)
Total amount you paid them in 2025 (from accounting records)
Pro tip: If you use QuickBooks, Xero, or similar accounting software, run a "Vendor Payments by Vendor" report for January 1 - December 31, 2025. This shows exactly who you paid and how much.
Step 2: Determine Which 1099 Form
1099-NEC (Nonemployee Compensation):
This is the form for independent contractor services
95% of self-storage operator 1099s go here
Deadline: January 31, 2026 (file with IRS AND send copy to recipient by this date)
1099-MISC:
Used for rents paid to landlords, royalties, prizes
If you pay ground lease rent to a property owner: 1099-MISC Box 1
Less common for storage operators
Deadline: January 31 for recipient copy, February 28 for IRS (paper), March 31 (electronic)
For most operators: You're filing 1099-NEC for contractor services. That's it.
Step 3: Choose Your Filing Method
Option A: Paper Filing ❌ (Not Recommended)
Buy 1099 forms from office supply store (~$20)
Fill out by hand or typewriter
Mail Copy A to IRS, Copy B to recipient, keep Copy C
Time: 2-3 hours
Why it sucks: Error-prone, requires buying special scannable forms, slow
Option B: IRS FIRE System (Free but Clunky)
IRS's free electronic filing system
Must register for account (takes a few days, so start NOW)
Interface is... not great
Cost: $0
Time: 1-2 hours after setup
Best for: Operators filing fewer than 10 forms
Option C: Online Filing Service ✅ (Recommended)
Services: Tax1099.com, TaxBandits.com, eFileMyForms.com
Upload vendor data, they format and e-file to IRS + send recipient copies
Cost: $2-8 per form (typically $20-80 total for small operators)
Time: 30-60 minutes total
Best for: Most operators—fast, cheap, reliable, worth every penny
Option D: Your CPA/Accountant
Hand them your vendor payment list, they handle everything
Cost: $100-500 depending on volume and CPA rates
Time: 15 minutes to gather data
Best for: Operators who outsource all tax work or have complex situations
Step 4: File by the Deadline
Critical date: January 31, 2026
Both of these must happen by January 31st for 1099-NEC:
Copy A filed with IRS (electronic or paper postmarked)
Copy B sent to recipient (email if they consented, otherwise mail)
Don't wait until January 30th. Aim for January 25th to account for any issues.
Step 5: Keep Records
Save forever (or at least 4-7 years):
All W-9 forms (you need them next year too)
Proof you filed (confirmation email from filing service, certified mail receipts)
Copies of all 1099s issued (Copy C)
The vendor payment report you used
THE PENALTIES (WHY YOU CAN'T IGNORE THIS)
Let's talk about what happens if you miss the deadline or don't file at all.
IRS Penalty Structure (Per Form):
Tier 1 - File 1-30 days late:
Penalty: $60 per form
Example: 5 late 1099s = $300
Tier 2 - File 31-180 days late:
Penalty: $120 per form
Example: 5 late 1099s = $600
Tier 3 - File after August 1 or don't file:
Penalty: $310 per form
Example: 5 unfiled 1099s = $1,550
Intentional Disregard:
IRS determines you knew about the requirement and ignored it
Penalty: $630 per form (or 10% of the payment amount, whichever is greater)
No maximum cap
Example: 5 vendors over 3 years = 15 forms × $630 = $9,450 in penalties
Additional Consequences:
State Penalties: Many states require 1099 copies filed with state tax authority. Separate penalty structure (often mirrors federal). You can't just file with IRS and ignore your state.
Audit Triggers: Pattern of not filing 1099s signals to IRS that you might be hiding payments. Increases likelihood of full business audit. The IRS logic: "If you didn't report payments going out, what else didn't you report?"
Vendor Audits Become Your Problem: When a vendor you paid gets audited and the IRS finds unreported income, they ask: "Who paid you?" Your name comes up. IRS then asks YOU: "Did you file a 1099 for this vendor?" If no, you're now part of their investigation.
The Math:
Filing 1099s properly:
Cost: $20-100 using online service
Time: 1-2 hours
Stress level: Minimal
Not filing:
Cost: $300-$10,000+ in penalties
Time: Hours dealing with IRS, CPA, penalty appeals
Stress level: Extreme
Audit risk: Significantly higher
The choice is obvious.
WHAT IF YOU'VE NEVER FILED (HOW TO FIX THE PAST)
If you just realized you should have been filing 1099s for the past several years, you're not alone. Many small business owners don't learn about this requirement until they're years into operations.
Good news: You can fix it.
Bad news: You need to fix it before the IRS finds you.
Option 1: Catch Up Immediately (Recommended)
The Process:
File all missing 1099s for prior years (2022, 2023, 2024)
Use the same online filing services—they support prior-year filings
Send recipient copies with note: "Corrected/Late 1099 for Tax Year [YEAR]"
Include brief letter to IRS explaining: "We recently discovered we had not been filing 1099s as required. We are correcting this oversight immediately. Please find enclosed 1099s for tax years 2022-2024."
What Happens:
IRS will likely assess late-filing penalties (see tier structure above)
BUT: Voluntary compliance before audit significantly reduces penalty risk
IRS has a "Reasonable Cause Exception"—if you show good faith effort to comply once you learned of the requirement, penalties may be reduced or waived
Much better than waiting for them to discover your non-compliance
Cost Reality:
Let's say you have 5 vendors per year for 3 years = 15 total 1099s to file late.
Filing cost: $30-120 (using online service)
Potential penalties: $900-$4,650 (Tier 2-3 penalties)
But: Voluntary disclosure often results in penalty reduction or waiver
Cost of doing nothing and getting caught later: Much higher
Option 2: Consult a Tax Professional (For Large Exposures)
If you're facing:
Many unfiled forms (20+ per year)
Multiple years of non-compliance (5+ years)
Large payment amounts
Potential "intentional disregard" classification
Consider hiring help:
Tax attorney can negotiate with IRS
CPA can prepare filings and penalty abatement requests
Cost: $2,000-$5,000+ in professional fees
Potential savings: Could save multiples of that in penalty reduction
Option 3: Do Nothing and Hope ❌ (Terrible Idea)
Why people do this:
"Maybe the IRS won't notice"
"I heard there's a statute of limitations"
"Too embarrassing to admit I messed up"
Why this backfires:
No statute of limitations on unfiled informational returns (1099s)—the clock never starts if you never file
IRS has gotten very sophisticated at matching payments through bank data and third-party information
When they find you (not if, when), penalties are higher because it wasn't voluntary compliance
Criminal charges possible in extreme cases of willful failure (rare but technically on the table)
The Statute of Limitations Reality:
For assessing penalties: IRS has 3 years from the due date.
BUT: If you never filed, the 3-year clock never starts. The IRS can go back indefinitely for unfiled forms.
Action Plan If You've Never Filed:
This week:
Accept that you should have been filing (no shame, lots of operators don't know)
Gather vendor data for at least the past 3 years (payment records, any W-9s you have)
File all missing 1099s this month
Include brief cover letter explaining the oversight
Be prepared for penalty notices to arrive (but know you did the right thing)
Don't wait. Voluntary compliance is your best defense.
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MAKE IT MODERN
THE 15-MINUTE 1099 SYSTEM
Most operators think 1099 compliance requires ongoing attention. It doesn't. It requires one good setup and three 5-minute checkpoints throughout the year.
Here's the system that makes it automatic:
THE ONE-TIME SETUP (30 Minutes, Do This Week)
Build Your 1099 Command Center:
1. Create Your Digital W-9 Vault (5 minutes)
In Google Drive or Dropbox:
Create folder: "_TAX - Vendor W-9s" (underscore makes it sort to top)
Inside, create subfolders by year: "2025", "2026", "2027"
Save blank W-9 PDF in root folder for quick access
Share folder with your bookkeeper/CPA (if you have one)
Why this works: Everything in one searchable place. Never lose a W-9 again.
2. Set Up Your Accounting Software Tags (10 minutes)
In QuickBooks, Xero, or whatever you use:
Create a custom field called "1099 Status" with three options:
Required (track this vendor for 1099)
Exempt (corporation, already tracked elsewhere)
Employee (gets W-2, not 1099)
For every existing vendor in your system:
Mark their 1099 status based on their W-9
Add their Tax ID if you have it
Verify address is current
Why this works: One-time tagging eliminates detective work every January. Your software now knows who needs 1099s.
3. Create Your W-9 Request Canned Response (5 minutes)
In your email client, save this as a template/canned response called "W9-Request":
Subject: Tax Form Required - W-9
Hi [NAME],
Before I process your payment, I need you to complete this W-9 form (attached). It's an IRS requirement for our records.
Takes 2 minutes. Just complete, sign, and reply with the PDF.
I'll process your payment as soon as I receive it.
Thanks,
[YOUR NAME]
[Attach: Blank W-9]Why this works: No rewriting the same email 20 times a year. One-click W-9 requests.
4. Set Three Calendar Reminders (5 minutes)
Set these recurring annual reminders right now:
June 30, 9:00 AM: "1099 Mid-Year Check" (5-minute task)
December 15, 9:00 AM: "1099 Year-End Prep" (30-minute task)
January 15, 9:00 AM: "FILE 1099s - DEADLINE JAN 31" (15-minute task if you did the other two)
Why this works: You can't forget if your calendar forces the issue. Three reminders = zero stress.
5. Bookmark Your Filing Service (5 minutes)
Go to Tax1099.com or TaxBandits.com right now:
Create account
Enter your business info
Save login credentials in password manager
Bookmark the login page
Why this works: When January 15th arrives, you're not creating accounts and entering business info under deadline pressure. You log in and file.
Total setup time: 30 minutes
Payoff: You just eliminated 3+ hours of annual scrambling
THE THREE ANNUAL CHECKPOINTS
Once your system is set up, 1099 compliance becomes three tiny tasks spread across the year:
CHECKPOINT 1: June 30th (5 Minutes)
Your calendar reminder fires: "1099 Mid-Year Check"
The Task:
Open accounting software
Run report: "Vendor Payments by Vendor, Jan 1 - June 30"
Filter to show only vendors tagged "1099 Required"
Scan the list for anyone approaching $600 (currently at $400-500)
If you see vendors you haven't collected W-9 from yet, send W-9 request email today
Why this checkpoint matters:
Catches the new lawn service, the new HVAC contractor, or the consultant you hired in March—before they become a January problem.
Time: 5 minutes
CHECKPOINT 2: December 15th (30 Minutes)
Your calendar reminder fires: "1099 Year-End Prep"
The Task:
Run report: "Vendor Payments by Vendor, Jan 1 - Dec 15"
Filter for vendors tagged "1099 Required" who received $600+
For each vendor, verify:
W-9 on file in your vault
Address current (people move, businesses relocate)
Tax ID entered in accounting software
Create a simple spreadsheet:
Vendor Name | Amount Paid 2025 | Tax ID | Address | W-9 on File? |
|---|---|---|---|---|
ABC Plumbing | $2,400 | 12-3456789 | 123 Main St | ✓ |
XYZ Lawn Service | $4,800 | 98-7654321 | 456 Oak Ave | ✓ |
If any W-9s are missing, send urgent request today (you still have 2 weeks before holidays)
Why this checkpoint matters:
You're doing all the hard work while vendors are still reachable, not on Christmas vacation. January becomes pure execution.
Time: 30 minutes
CHECKPOINT 3: January 15th (15 Minutes)
Your calendar reminder fires: "FILE 1099s - DEADLINE JAN 31"
The Task:
Log into Tax1099.com or TaxBandits (account already set up in November)
Click "Import from QuickBooks" or manually enter from your December spreadsheet
Review each 1099 for accuracy:
Name matches W-9
Tax ID is correct
Amount matches your records
Click "Submit for E-Filing"
Confirm recipient copies will be emailed/mailed
Save confirmation email
Done.
Why this checkpoint works:
Because you did Checkpoints 1 and 2, you have all data ready. This is pure mechanical filing, no detective work.
Time: 15 minutes
THE INTEGRATION MULTIPLIER (Make It Even Easier)
If you want to reduce even the 15 minutes:
Use Accounting Software + Filing Service Integration:
Most modern accounting software (QuickBooks Online, Xero, FreshBooks) integrates directly with filing services:
How it works:
All year, you code payments correctly in QuickBooks
December 15: Verify vendor info is accurate
January 15: Click "Send to Tax1099" from within QuickBooks
Review imported data (already formatted)
File
Time saved: Another 5-10 minutes (no manual data entry)
Cost: Usually included in your filing service fee
THE ENFORCEMENT MECHANISM (Why This System Actually Works)
Most "systems" fail because there's no consequence for ignoring them. Here's how to make this stick:
The W-9 Gatekeeper Rule:
Program your brain (and your bookkeeper's brain) with this single rule:
"If there's no W-9 in the vault, there's no payment processed."
Implementation:
When you receive an invoice, before you pay it, ask: "Do I have their W-9?"
If yes → process payment
If no → send W-9 request, hold payment
If they push back → payment stays held
This one rule eliminates 90% of 1099 problems.
Once you refuse to pay 2-3 vendors without a W-9, the habit becomes automatic. You literally cannot process a payment without thinking "Do I have their W-9?"
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BEFORE YOU GO
Links I found interesting this week
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FROM THE STOICS
Make the best use of what is in your power, and take the rest as it happens.
— Epictetus
