Forum Moderators: skibum
I'm going to run my new affiliate program on my own (at least initially). What’s the best source of information for the tax implications and requirements of paying affiliates?
Specifically, I need to know what to send affiliates at the end of the year (individuals vs. businesses), dollar thresholds, etc. Any help is greatly appreciated.
Rick
You'll then have to file a 1096 transmittal which is basically a summary sheet or grand total of all the 1099s.
[irs.gov...]
Suggest you check with your CPA or accountant on this.
Does the $600 figure apply to businesses as well as individuals?
Could I go ahead and start the program not having this nailed down or is it best to get this figured out first? The people wanting to be my affiliates are not likely to drive $7,500 in net sales per year, which is the amount necessary for me to pay out $600.
I'd go ahead and start, but I would put a tax-reporting section in the affiliate agreement that says that when an affiliate reaches $500, no further checks will be issued without the W9 on file. I'd also include the tax status (Indiv/Corp/Partnership/LLC/other) and SS# or FID# questions in the sign-up form, they're pretty routine now anyway.
>But when a person/site applies to be an affliate, is that when they have to fill out the W-9, or do we fill those out based on the application?
Some companies ask for them upfront, but I think that's overkill. The W-9 just satisfies the IRS that you, as payer, have tried to get the proper tax number. Since, as you say, the vast majority aren't likely to get to $600 and may not even require 1099s then that's a lot of work for so few.
>Does the $600 figure apply to businesses as well as individuals?
In theory, this can get complicated for some types of 1099 payees, but for commission sales it's a little more simple in practice. Corporations do not have to be reported, but other types of businesses may. Most don't bother separating the different classes and just report everything.
Cost of compliance: The last time I checked, failure to produce a 1099 carried a penalty of $50 each. I know of several businessmen who, once they weigh the cost of compiling 1099s and consider the very low probability that they will ever be brought to task on this by the IRS, feel that it's more cost-effective to just pay the penalty.
Again, as I'm neither an accountant or tax professional, you should consult one asap.
I don't know enough to reply on that one. I know I don't send 1099s to those outside the US. However, here's where it gets messier; just because they are physically located outside the US, doesn't mean they aren't taxpaying US citizens.
