Affiliates and taxes

[512 Designs]

I'm not sure about other countries, but in the USA if you have affiliates selling your products and they make more than $600 per year, then you have to send them a 1099 form for income tax purposes.

How do you handle this type of thing? Is there a way that the affiliate can fill out a W4 form (I think that's the right one) online and send it to you or do you have a pdf file that they fill out and mail to you?

Or do you simply ask them for their name, address and SS number?

Also, do you pay them without getting that info first...but when they reach the $600 mark stop paying them until you get it? Or do you wait until you get the form to pay them?

Thanks.

Mike

[digitalproductreporter]

funny thing is that I've emailed some folks like e-junkie.com (who i use for one affiliate program) and they didn't have the slightest about things like this

one option would be to use something like clickbank that handles paying affiliates and 1099/taxes for you

sure you need to send US affiliates a 1099, but what about the other folks selling for you around the world?

[acrasial]

Wow this is confusing? How does that work then for your own taxes, when it comes to having "employees" who are affiliates?? One of the best things about being an affiliate, is that you don't have to give out all of your personal information and can kindof be anonymous... at least that's what I have loved about it- but this sure sheds a whole new light on it? That you suddenly have to give people your information, and all kinds of other things? Kindof creepy at the same time... they make money for you... do alot of things for you... and then at the end of the day you have to demand their address, personal information and all kinds of other things?


that doesn't feel wrong to anyone here either?

[J smith]

Depends on how you are handling affiliates. As mentioned above you can use clickbank or similar services to handle affiliates/taxes. Another very popular way to handle this issue is to use a prgram that splits the sales between you and affiliate (I think rapid profits script does this) Say you set a 50% comission, then every other sale will go to affiliate's paypal account. You never send them a check (or in fact even get a hold of their share) thus no need for them to give you a w9 form. At least that's how I understand it.

Then again I am not an accountant, so I'd say talk to one and see what they say.

This does bring up an interesting question, what about none affiliates that you might pay over 600$? Such as article writers, graphic/web designers etc, do you have to get a w9 form from them again or would they be considered contractors? Ie. similar how you don't ask a plumber for a w9 form.

[Kay King]

It's not about "feeling" - it's tax law in the US

Clickbank sends out 1099's as does google and any other program that pays affiliates. Some pay to $600 and hold payment until SSN is supplied - others insist on SSN when you sign up and before you are paid.

Sellers who are in other countries with affiliates in the US may not be held responsible for meeting US tax law - but the US affiliates are still responsible for paying taxes on the income with or without a 1099.

Some people don't realize that you are responsible for taxes on all your internet income - whether you have earned enough for a 1099 to be filed or not.

Unless ejunkie is paying you directly for something, they wouldn't be involved in 1099 forms. Neither is paypal as they are only processing payments.

kay

[rbecgolf]

W4's are only for employees. You should claim the income even if you do not receive a 1099.

[UtopianDreams]

but as the owner of a product or service using affiliates to promote how would you declare the monies paid out to affiliates and such so you are not paying the taxes on it

[Randy Meirndorf]

Yes, you will have to mail them and the IRS form 1099 misc in order to claim these as valid business expenses if they made over $600 in commissions, all you need from them is their name, address and ssn or EIN (also known as a TIN - taxpayer identification number). Which can be obtained from https://sa2.www4.irs.gov/modiein/individual/index.jsp for free if the affiliate dosen't want to give out their ssn.

Note: Form W-4 and I9 are required forms for employee's.

[globalpro]

Something that most forget is that if you collect SSNs, then there are certain precautions you need to take to make sure that the info is protected. Can create a liability issue.

One thing that helps is if you have things to where the affiliate gets paid directly. Not to plug anything here, but there are sales processing/affiliate management scripts that handle direct payments to PayPal that gets the vendor off the hook (at least the one I use does). Or go with a service like ClickBank that handles it for you.

Simple is best.

Thanks,

John

[512 Designs]

Well, the membership site software that I use has a built in affiliate tracking plug-in. It will keep track of any sales that come my way via affiliates and I can pay them with Paypal.

So if what I'm reading is correct, I don't have to worry about sending out 1099 forms if I use Paypal to pay my affiliates because Paypal will send them?

Or is that incorrect?

Mike

[Mohammad Afaq]

That's confusing and I am worried about it because I don't want an hassle of keeping track of all the sales and the taxes and stuff.

Just wondering that if you pay with paypal does it cover your tax.

[affmrktng]

I am wondering what about freelancers that get paid for jobs they do for others. The only record of that is Paypal. Do all freelancers even tell the government that they earn an income at all?

[globalpro]

Mike and Mohammad,

If you get the money, then pay the affiliates, you are responsible for issuing the correct forms. What I am talking about is the affiliates getting paid direct. You pay them and they are like contractors. In the US, the money has to be accounted for for tax purposes, so you are responsible.

This is why people like using ClickBank. They handle all that.

Thanks,

John

[Ben Clemons]

We like to use Rapid Action Profits, because the affiliate gets paid directly to THEIR paypal account. We don't have to deal with any forms for our RAP driven products, which is nice

[Kay King]

Paypal is only a payment transaction site - they don't pay your affiliates - you do. Paypal only transmits funds from one person to another. They don't do anything about taxes except give you accurate records you can download.

If the government asks paypal for your financial records - they'll get them. Some think internet income is "hidden" but unless someone is placing cash directly in your hand, money is trackable.

If you are paying affiliates, that is a business expense you would claim on your own taxes - so you need accurate records yourself, too.

The IRS has a website that explains all of this so a visit to that site might tell you what obligations you have.

kay

[InternetMarketingIQ]

I have my accountant do it for me. Includes anyone I hire and pay over $600. You might want to just get a good bookkeeping service to take care of it. Its not very expensive. If you have a CPA firm do it... if there are problems then they get to deal with them, that's why you pay them.

Any income earned online or otherwise is taxable whether it's $1 or $600.

[512 Designs]

I guess the best way for me to do it since the whole affiliate tracking thing is built into my system is to pay the affiliates each month until they reach or go just below $600.

Then I'll send them an email requiring them to give me their name, address and SS# before I pay them any more.

Mike