Only two things in online marketing are certain: high conversions and net 15 payouts.
Wait… that’s not right.
I meant to say taxes and server crashes.
If you’re an affiliate, you should have received a 1099 form for each network or merchant that you’ve done over $600 in business with by Thursday February 1. If you’re a network or merchant, you need to make sure that you’ve got your 1099’s mailed out.
From the Wikipedia entry on 1099’s:
A notable use of Form 1099 is to report amounts paid to independent contractors (in IRS terminology, such payments are nonemployee compensation). The ubiquity of the form has also led to use of the phrase “1099” to refer to contractors themselves. U.S. tax law requires businesses to submit a Form 1099 for every contractor paid more than $600 for services during a year. This requirement usually does not apply to corporations receiving payments.
Many businesses and organizations must file thousands of 1099s per year. Thus, payers who file 250 or more Form 1099 reports must file all of them electronically or magnetically with the IRS. For further information refer to Publication 1220, Specifications for Filing Forms 1098, 1099, 5498 and W-2G Magnetically or Electronically or Publication 1187, Specifications for Filing Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. (http://www.irs.gov/pub/irs-pdf/p1220.pdf) The IRS no longer accepts 3 1/2-inch diskettes for filing information returns, and is phasing out other magnetic media. Electronic filing will soon be the ONLY acceptable method to file information returns at its computing center in Martinsburg, West Virginia.
I’d argue that we all need an educational discussion on this topic because it’s becoming more and more complex to follow the rules due to affiliate marketing’s increasing reach beyond just revenue sharing. For example, a current thread over at ABestWeb is discussing the validity of claiming PPC losses on individual taxes. Interesting.
Some hosted solutions such as MyAffiliateProgram are even offering to handle the composition and delivery of 1099’s for partnering merchants, making the whole process a little less painful and time-consuming. That’s an very valuable and mature business selling point.
Carsten Cumbrowski has posted some helpful info here and here is an interesting thread discussion from ABW in 2002 about 1099’s and Linkshare.
So, what do you say, Shawn? Affiliate Marketing and Taxes discussion at the next Summit?
How much trouble do you have to go through to follow the tax rules?
Have affiliates adequately figured out the proper procedure for claiming earnings and losses?
3 thoughts on “1099 Form: It’s that Time of the Year Again”
This may be a silly question but I’ll ask anyway. I started with affiliate marketing this year, late in the year. Several networks that I’ve worked with have paid me, but not all have crossed the $600 threshold. I’m guessing I won’t get a 1099 from these folks – how do I handle that from a tax standpoint?
> So, what do you say, Shawn? Affiliate Marketing and Taxes discussion at the next Summit?
We ask attendees after each show what topics they want to cover. over the years, there have maybe been a half dozen people total that mentioned taxes.
I’m happy to to do, but I am not getting any indication that it’s a topic people want to hear.
Personally, I try to outsource anything that is outside of my skill set, and taxes are definitely not one of my focuses.
Do you think a lot of affiliate marketers are trying to keep up with tax laws and related issues themselves?
I found it to be a better ROI for me to get an accountant for that stuff, even back when I was making $200 or so a month as an affiliate in the 90s, than to struggle through it myself.
Good point, Shawn. Outsourcing probably is the most popular way to go about dealing with this.