|Owning an affiliate program: Taxes|
How do you report this expense?
I am going to have a lot of questions about establishing YOUR OWN affiliate program. If anyone owns their own affiliate program, I would love your help. Here is my question to start things off:
1. When taxes are due, how does the owner of an affiliate program record the expense of paying out commissions to its affiliates? Are there certain forms that need to be filled out?
Bradley, I'm afraid that's an awful general question because it will depend on what type of business you are running (sole proprietorship, partnership, corporation, LLC) just for starters.
I'll bet it also depends on what type of business your affiliates are running (individual, corporation, etc).
You really ought to get professional tax advice from on CPA on this, or read a lot at [irs.gov...]
Well, for starters, our business is an S-corporation... I'll take a look at the link you provided. If you have any knowledge regarding this subject matter, that would be great. I'm sure a lot of other people would be interested in this as well.
US taxes, it appears.
To cover yourself, you'll need to have each affiliate (US, not sure about how to handle foreign affiliates) fill in a W-9. At the end of the year any affiliate that has received $600 or more will have to be sent a 1099-Misc. You'll submit your copies of the 1099s along with a 1096 Transmittal (summary sheet) to the IRS. Note that while the law lets you skip anyone not earning $600, the gov really expects you to file a 1099 on all amounts paid.
Disclaimer: I'm not a CPA or tax preparer.
>have each affiliate ... fill in a W-9
The best way to handle this, is hold any payment that would put you over the $600 threshold until you receive the w9 from the affiate. However, be sure you put this in your affiliate agreement and give them time to send it to you before you would have to hold a payment.
Wow, great advice everyone. Thanks so much.. (I realize that any advice given here is only advice and one should seek the professional advice of an attorney :))
Drastic, do you (or anyone) have a copy of an affiliate agreement that talks about remitting the w-9 agreement before the check is sent?