I was at a cannabis conference a few weeks ago and a panel was discussing how to pay growers. An older gentlemen said, “Well, you’ll just have to 10-99 him.” It was a step in the right direction, but unfortunately wasn’t 100% accurate. So what’s a 10-99 and who should get them?
So what is a 10-99?
Form 1099-MISC is required by the IRS if you are paying someone more than $600 that is not your employee and who is considered an independent contractor. Each individual that you are paying should receive a 10-99.
Who should get a 10-99?
Individuals such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, in which they offer their services are generally independent contractors according to the IRS.
Who doesn’t need a 10-99?
Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C- or S-Corporation do not require a 10-99 to be issue. Also, payments for merchandise, freight, storage, and similar items don’t require a 10-99. So if you’re selling product (i.e. a grower sells marijuana to a processor or wholesaler) you are not required to get a 10-99. Note: Payments to attorneys (even if they are considered a corporation, require a 10-99)
What’s the difference between a 10-99 and a W-9?
A W-9 and 10-99 go hand in hand. Imagine your business is hiring Joe, an independent, self-employed accountant for consulting work for the month; you’ll need to request he fill out a W-9 and provide him a 10-99 after you’ve paid him.
A W-9 is an informational return there you validate an individual/entities tax identification number (TIN) and payee’s correct name. You’ll use the W-9 to validate Joe’s name, TIN, and other required information. I recommend filing a W-9 for all vendors or suppliers you work with. This shows that you are performing a due-diligence on the businesses you work with.
A 10-99 MISC will be used to report the total amount you paid to Joe. You are also required to give him a copy of the 10-99. You will include his TIN, amount paid, and other requirement information. Joe will use this to file his personal taxes.
The best way to keep track of your vendor and supplier compliance is through a compliance tracker. This can easily be done in excel and updated each year. Remember, performing a due-diligence on your suppliers and vendors is definitely a business best practice.
Reminder: The due date for furnishing statements to recipients for Forms 1099 is February 16, 2016.