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Biting the Bullet With Jrox Jam But What About Affiliate Taxes?

by TiffanyLambert
13 replies
Hey Warriors!

I'm going to install Jrox Jam on one of my sites so that affiliates can promote it, but I don't know how it works with affiliates and tax issues now.

If they earn over $600 a year, I have to send them the 1099, right?

How do I get their info like Name, address and SSN?

Is that built into Jrox Jam?

Tiff
#affiliate #biting #bullet #jam #jrox #taxes
  • Profile picture of the author globalpro
    Tiff,

    I don't think the software will do anything beyond allowing affiliates to make sales and giving the statistics on who made what.

    I would recommend having them fill out the 1099 from (get it at the IRS site) and mailing you the physical paperwork for your files. This way if you pay them and they don't report the income, you won't be on the hook for the taxes.

    The form, even if they use bogus info, is your only protection.

    Thanks,

    John
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  • Profile picture of the author TiffanyLambert
    Good ideas! Should I have some sort of "you don't get paid until I get the form" rule? Or is that too strict?

    I don't want to be a turn off for commission payouts but I don't want any IRS troubles either. LOL!
    tiff
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    • Profile picture of the author Sean A McAlister
      Originally Posted by TiffanyDow View Post

      Good ideas! Should I have some sort of "you don't get paid until I get the form" rule? Or is that too strict?

      I don't want to be a turn off for commission payouts but I don't want any IRS troubles either. LOL!
      tiff

      The short answer would be YES! Anyone who is a reputable affiliate will be cool with this, understand it etc..... and those who aren't...well you don't want them anyway (IMHO).

      There's no doubt it could be a small deterrent for some....but you could very well get hammered down the line by the IRS and it's not worth it.

      Additionally, there has been a rash of scammers who use stolen credit card info, make purchases, collect commissions and then it's too late because the chargeback comes after the usual 30 day refund period and by then it's too late.

      We are incorporating a 2 step process more and more with even MORE requirements to become an affiliate simply to weed out folks.
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      • Profile picture of the author TiffanyLambert
        Originally Posted by Sean A McAlister View Post

        Additionally, there has been a rash of scammers who use stolen credit card info, make purchases, collect commissions and then it's too late because the chargeback comes after the usual 30 day refund period and by then it's too late.

        We are incorporating a 2 step process more and more with even MORE requirements to become an affiliate simply to weed out folks.
        This happened to me on PDC awhile back. It hurt BAD - they stole credit cards, used various affiliate names, and sold a TON of our BuildMyLens (now defunct) VIP packs at like $800 a pop.

        We had paid out commissions before we got notices about them being stolen. I was pissed!!!!!!!!!!!!!! But won't have that happen again
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    • Profile picture of the author darrin_kuykendall
      Originally Posted by TiffanyDow View Post

      Good ideas! Should I have some sort of "you don't get paid until I get the form" rule? Or is that too strict?

      I don't want to be a turn off for commission payouts but I don't want any IRS troubles either. LOL!
      tiff
      I would not recommend that rule at all.
      You can easily get sued for a written statement such as that.

      It's incumbent upon you to provide the form. It's incumbent upon the person receiving the funds to pay taxes on earned income.

      Simply put, send the 1099 forms immediately to the individual/business who have signed up for your program. It's best if you have it on file, whereas, all you will have to do is do a bit of follow up & accounting on your end at the end of the year.

      But yes, if anyone makes over $600 within a year, MUST be sent the form for their records. Same concept of what is done with the lottery or when you go to a casino. If you make over a certain amount, you have to fill out the paperwork.

      Do not play games about "you don't get paid." That's technically illegal.
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      • Profile picture of the author Sean A McAlister
        Originally Posted by darrin_kuykendall View Post

        I would not recommend that rule at all.
        You can easily get sued for a written statement such as that.

        It's incumbent upon you to provide the form. It's incumbent upon the person receiving the funds to pay taxes on earned income.

        Simply put, send the 1099 forms immediately to the individual/business who have signed up for your program. It's best if you have it on file, whereas, all you will have to do is do a bit of follow up & accounting on your end at the end of the year.

        But yes, if anyone makes over $600 within a year, MUST be sent the form for their records. Same concept of what is done with the lottery or when you go to a casino. If you make over a certain amount, you have to fill out the paperwork.

        Do not play games about "you don't get paid." That's technically illegal.
        You can absolutely let affiliates know that their commissions would be in jeopardy for non-compliance of your Affiliate Terms and Conditions...of course the way in which you let them know IE the wording can be done a bit more cordially however, that is why there are Terms and Conditions...how is it Illegal? Get Sued? I think that would be a losing case but I'm not a lawyer :-)


        The same things applies with demanding affiliates comply with FTC Rules or their Affiliate Account /Commissions can be forfeited. I've ousted many affiliates because of these violations...

        The games that are played are by affiliates who are trying to beat the system...

        And as John pointed out above... even when the 1099 are filled out and sent in....there are still no guarantees that the affiliate has inserted the correct Tax ID / Social Security Number.

        Because signing up for an affiliate program is instantaneous in most circumstances, it's imperative that the Affiliate supply their legal information even before they receive the 1099. The other alternative is to have a STRICT Approval process in which this would be disclosed....
        You Won't Get Paid if we Don't Have Your Legal Info...Period.

        The 1099's are not sent until after commissions are earned, prior to payouts, because there is no reason to have 600 affiliates send you forms when only 10 are going to make the money to warrant being 1099'ed, however, it's still important that they supply it (Tax ID / SS#, Legal address) UpFront (Via Your Affiliate Registration Form) because as the Product Owner, you don't really know who will produce (unless you have a personal relationship)....and the minute you feel resistance on the front end from an affiliate unwilling to provide the information...then 9 out of 10 times he/she is not someone you want on your team, and won't supply a completed 1099 when it's time too...at least from my experience.

        Again, most PRODUCING affiliates won't have a problem with this....some even welcome it.
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        • Profile picture of the author darrin_kuykendall
          Originally Posted by Sean A McAlister View Post

          You can absolutely let affiliates know that their commissions would be in jeopardy for non-compliance of your Affiliate Terms and Conditions...of course the way in which you let them know IE the wording can be done a bit more cordially however, that is why there are Terms and Conditions...how is it Illegal? Get Sued? I think that would be a losing case but I'm not a lawyer :-)


          The same things applies with demanding affiliates comply with FTC Rules or their Affiliate Account /Commissions can be forfeited. I've ousted many affiliates because of these violations...

          The games that are played are by affiliates who are trying to beat the system...

          And as John pointed out above... even when the 1099 are filled out and sent in....there are still no guarantees that the affiliate has inserted the correct Tax ID / Social Security Number.

          Because signing up for an affiliate program is instantaneous in most circumstances, it's imperative that the Affiliate supply their legal information even before they receive the 1099. The other alternative is to have a STRICT Approval process in which this would be disclosed....
          You Won't Get Paid if we Don't Have Your Legal Info...Period.

          The 1099's are not sent until after commissions are earned, prior to payouts, because there is no reason to have 600 affiliates send you forms when only 10 are going to make the money to warrant being 1099'ed, however, it's still important that they supply it (Tax ID / SS#, Legal address) UpFront (Via Your Affiliate Registration Form) because as the Product Owner, you don't really know who will produce (unless you have a personal relationship)....and the minute you feel resistance on the front end from an affiliate unwilling to provide the information...then 9 out of 10 times he/she is not someone you want on your team, and won't supply a completed 1099 when it's time too...at least from my experience.

          Again, most PRODUCING affiliates won't have a problem with this....some even welcome it.
          Many large companies who have affiliates or freelancers have systems & processes in place that have the individuals provide the information and send in the 1099 form immediately upon signing up for the program. This way, the product/site owners already have the information on file.

          Terms and Conditions only is meant to reduce risk. It's the transaction that has taken place, when can be proven, that matters. If there is a transaction has taken place, revenue has been earned, and revenue not paid, a person can absolutely EASILY be sued in these instances.
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          • Profile picture of the author Alexandre Valois
            Tiff,

            I'm using iDevAffiliate myself rather than Jrox (which seems to do a great job as well, I just needed a different set of features) and it seems none of the scripts have that integrated.

            iDev allows custom landing pages in the member area, which I am sure Jrox does as well, so the best way around it for me was to get an SSL for the domain and ask people to upload a copy of the file or fax it to a toll-free number to get their account activated.

            It's a hassle and you may lose out on the smaller affiliates, but if you're planning on using the same system to manage multiple affiliate programs, I believe it's a great opportunity to build a nice little affiliate community and develop a more personal relationship with them.
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      • Profile picture of the author globalpro
        Not sure how you would consider it illegal. It's no different than, say, a salesman at a brick and mortar business on a commission basis having to fill out a W2 form before they get paid.

        Besides, getting the form in hand before paying out anything is what IRS recommends. I contacted them about this for a client and it's what was told to me.

        They don't really care either way, but some one is going to be on the hook for taxes.

        Thanks,

        John

        Originally Posted by darrin_kuykendall View Post

        I would not recommend that rule at all.
        You can easily get sued for a written statement such as that.

        It's incumbent upon you to provide the form. It's incumbent upon the person receiving the funds to pay taxes on earned income.

        Simply put, send the 1099 forms immediately to the individual/business who have signed up for your program. It's best if you have it on file, whereas, all you will have to do is do a bit of follow up & accounting on your end at the end of the year.

        But yes, if anyone makes over $600 within a year, MUST be sent the form for their records. Same concept of what is done with the lottery or when you go to a casino. If you make over a certain amount, you have to fill out the paperwork.

        Do not play games about "you don't get paid." That's technically illegal.
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        • Profile picture of the author SuResearcher
          Definitely have a process in place to send out those 1099's to affiliates.

          Here is something else to think about:
          • Some states have a sales tax on digital downloads and have the affiliate nexus law. For e.g. North Carolina (recent law)
          • So, if you have affiliates in North Carolina and have customers in North Carolina, you might be liable for paying North Carolina sales tax.
          - If your sales threshold (to NC residents) meets or exceeds the threshold set by the law AND
          - You have affiliates in NC THEN
          - Do your due diligence. You might be liable for NC sales tax.

          NOTE: I used NC as an example because I know of that one. You might have to do due diligence on all state laws where the states have a sales tax on digital downloads and have passed the nexus law and where you have affiliates. Talking to an attorney or calling the tax board of the state would definitely help.

          DISCLAIMER: I am not an attorney and this is not legal advice
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        • Profile picture of the author darrin_kuykendall
          Originally Posted by globalpro View Post

          Not sure how you would consider it illegal. It's no different than, say, a salesman at a brick and mortar business on a commission basis having to fill out a W2 form before they get paid.

          Besides, getting the form in hand before paying out anything is what IRS recommends. I contacted them about this for a client and it's what was told to me.

          They don't really care either way, but some one is going to be on the hook for taxes.

          Thanks,

          John
          That's exactly why I stated, send the forms immediately to the individual when they sign up for the program. That way you not only get them on file, have all the information ready. Not only will they know what form they will receive (again) if they make over $600 at the end of the year, but all you would have to do is fill out the financial information to those that have a completed file.

          And yes, it is illegal to not pay when the transaction has taken place. You can have all the terms and conditions you want. However, if that transaction has taken place, and a vendor can prove it, simply, that losing case would be on the product owner. Terms & Conditions simply reduce potential risk. In a court of a law, if it can be shown that the transaction has taken place, with sign-up of program, and you have a stated deadline of paying an affiliate, and you don't, you can surely be sued. Do not think you cannot.
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  • Profile picture of the author globalpro
    Sean pretty much summed it up.

    The most important thing is to protect yourself first, but like Sean said, I don't think it becomes an issue with people that are serious about promoting your stuff.

    Thanks,

    John
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