When do you NOT file a 1099 form for affiliates?

11 replies
I know that you usually don't need to send a 1099 form to affiliates (and the IRS) if you pay the person less than $600 a year. I have also heard that if you use an instant commission affiliate program, where they are paid directly by customers for a portion of the sales they refer, you also don't need to send one.

But what's REALLY the difference between an affiliate making the *same amount of money* promoting your product either through direct payments from customers with instant commissions or through you paying them that money later on?

The way I see it, you claim your profits, and they claim theirs. Why does it have to be so much more complicated?

In what other cases would a 1099 not be necessary?

Also, would you need to file one when you buy a marketing product over $600? This is getting complicated, grr...
#1099 #affiliates #file #form
  • Profile picture of the author Floyd Fisher
    You should ask a tax professional that question.
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    • Profile picture of the author JD Nunes
      Originally Posted by Floyd Fisher View Post

      You should ask a tax professional that question.
      Plenty of people here should know. Lots of us pay affiliates and deal with these issues.
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    • Profile picture of the author yacubmk
      You should consult your tax professional
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  • Profile picture of the author JustinAtlan
    Hey I think it is mandatory for both. The second one is just not prove-able!
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  • Profile picture of the author Michael Oksa
    Hi J.D.

    I am not trying to be a smarty pants here, but my answer to the question of "When do you NOT file a 1099 form for affiliates? is...

    When my accountant tells me not to.

    That's the truth. I call him all the time asking about exceptions, and rules, and what I need to do (or not do). That's one of the reasons a real business should have an accountant they can call year-round. But this isn't meant to be a lecture, I know you're a smart guy. Instead, it's for the benefit of others that may happen upon it.

    Also, I was under the impression that the deadline for getting 1099s out to people was January 31st. However, I know there are some dates that have moved this year, so I could be mistaken.

    With all of that being said, if the 3rd party issues a 1099, I would think you don't have to. If they don't then you do.

    BUT I am NOT an accountant, so that's nothing more than a non-professional guess.

    All the best,
    Michael
    Signature

    "Ich bin en fuego!"
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  • Profile picture of the author GuruGazette
    I'm not a lawyer/accountant/etc but basically: if you don't pay them anything, you have nothing to deduct and no 1099 is needed.
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  • Profile picture of the author globalpro
    According to IRS, if you pay them any money, you need to provide a 1099. What a lot of people miss is that you as the merchant/vendor/payer, you are required to have a physical copy of the 1009 form filled out and on file.

    Means the affiliate has to download the form, print it, fill it out and mail it to you. You maintain the copy on file.

    If you don't, and the affiliate doesn't pay the taxes owed, you are responsible for it. The money is charged as income to you. If you have the form filled out, then you are protected. It's the only protection you have. Doesn't matter if they filled out wrong info, you have done your part.

    You have to send a 1099 for whatever amount you pay them, then it's their responsibility to take care of things from there.

    I got this info from IRS while researching this for a client. They have info on their affiliate page with the form for affiliates to download, and instructions on what to do. The affiliate doesn't get paid until they have the form in hand.

    With the instant payment programs like RAP, they is no need to do this, since they receive the money direct (never crosses your hands). Big reason they are so popular.

    Definitely consult the professionals, but I figured IRS would know what they want/require.

    Hope that helps.

    Thanks,

    John
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  • Profile picture of the author JD Nunes
    "If you don't, and the affiliate doesn't pay the taxes owed, you are responsible for it. The money is charged as income to you." This can't be true. You are only responsible for paying taxes on profits you make, not expenses. Thanks for the effort, though.
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    • Profile picture of the author globalpro
      I got the info from IRS. I figure if they don't know how it works, then who would.

      Thanks,

      John

      Originally Posted by JD Nunes View Post

      "If you don't, and the affiliate doesn't pay the taxes owed, you are responsible for it. The money is charged as income to you." This can't be true. You are only responsible for paying taxes on profits you make, not expenses. Thanks for the effort, though.
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      • Profile picture of the author JD Nunes
        Originally Posted by globalpro View Post

        I got the info from IRS. I figure if they don't know how it works, then who would.

        Thanks,

        John
        Could you please give me a link to exactly where it states this?

        Edit: I think I read that wrong. What you meant was that if you don't file the form and keep a copy on file, you would have to pay taxes on money they did not...right? But how would they know what's what, if nothing was documented? (Apart from auditing everyone, of course.)
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        • Profile picture of the author globalpro
          Originally Posted by JD Nunes View Post

          Could you please give me a link to exactly where it states this?
          I contacted them direct. You have to sit on phone and wait to talk to someone, but it's worth it.

          Originally Posted by JD Nunes View Post

          Edit: I think I read that wrong. What you meant was that if you don't file the form and keep a copy on file, you would have to pay taxes on money they did not...right? But how would they know what's what, if nothing was documented? (Apart from auditing everyone, of course.)
          Having the form on file is to protect you IF the affiliate doesn't pay and you do get audited for some reason (can happen).

          Thanks,

          John
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