Affiliate Taxes

[Loony]

Hi all,
I'm sure this has been discussed, but here goes. I have a site that I don't work on tooooo much, and have some affiliate links. Last year I made about $800 in combination with 3 different affiliate programs. Should I list this income on my individual tax return? I don't have a "business" set up, no formal sole proprietorship, etc., just me. Everything else I've seen about this says to fill out Form 1040 Schedule C, and Schedule SE if the amount is over $400. (Is that for all additional income, or is each counted separately? Ex - $250 from program A, $350 from program B, OR $600 total and over $400?)
Thanks for any suggestions or help. I know not to consider this legal advice, etc., and folks will say to consult a tax advisor, etc., but it is all quite new to me - I'm in the dark. Thanks in advance!
Loony

[Linda Buquet]

Loony,

I hated to see your question go unanswered, but I am not very tax savvy. Hopefully someone else will answer your question. Also try going to AbestWeb and search ing for taxes. There are a ton of threads there about it.

[Cedric]

I Am Not A CPA.

Whatever the cutoff point is, it's for ALL additional income -- not divided up between programs. The IRS doesn't care where the money comes from (or how many sources), they just care about the dollar amount (for this particular situation).

And as you guessed, my top recommendation is to get an accountant. The first year I had one he saved me about $15K in taxes... I'll never fly solo again. ;)

[Karen Hudgins]

I am not a tax expert either. You should always verfiy tax advice with your CPA. I am the affiliate manager for our affiliate program and as far as I know, we ask our affiliates to complete a W-9 form where they indicate what type of business they are or if they are an individual. We then file those with our tax accountants who then issue the W-2 forms which you should bring to your tax accountant. If you have specific questions, my advice would be to chat with your tax advisor and the managers of your affiliate programs.

[TrafficProducer]

I am not a tax expert either. You should always verfiy tax advice with your CPA.

In the United Kingdom you need to state all income of any type or form of payment even in kind.

They may not charge you anything. Try to make sure you list ALL your expenses, paper, ink, hosting, etc.

Maybe even someting towards Rent on properties.

You may find some helpful links here:-

http://www.bosslinks.com

[Loony]

Thanks for the input, everyone. I think I'm pretty much set after doing some research on the IRS site, etc. However, I am wondering - do affiliate sites such as Linkshare, CJ, etc., actually send out W-2's? I haven't gotten anything, and can't find much on their sites relating to it.

Loony

[lmims]

affiliate sites such as Linkshare, CJ, etc., actually send out W-2's

Disclaimer:I'm not a tax professional...
Check the affiliate sign-up page for each company. You have to have done a certain volume ($500- I think) to have a W-2 issued. They will have to have your social security number/tax id on file to be able to send one out.

Otherwise go off your commssion reports, bank deposits.

I also deduct my ISP connect fees and website as well as pay-per-click all as business expenses.

If your business is small like mine, it is difficult ot justify a CPA. Fortunately there are retired IRS agents that will help you comple your tax paperwork. Contact your local library to find out where they are in your area. When my wife was in college she received this help.

Also, I am filing with TaxAct.com (they have an affiliate program too!) If you upgrade there are tax modules that might help you out.

Logan Mims
http://www.print-money-at-home.org

[Cedric]

If you are an individual, you SHOULD get W-2s from everyone you made over $600 from (I THINK it's $600, not positive). That does not mean you will (some merchants are lax), but you must still report the income.

The rules are different for corporations and I don't believe networks/merchants are required to send W2s to corporations. Nonetheless, they may or may not send. Bottom line, you still report all the income.

I believe the deadline for sending W-2s is January 31st, so don't expect to seem before that. ;)

[qbalance]

I am a CPA and have been doing taxes for over 18 years.

Yes, all income from affiliates are subject to income tax and considered earned income. File form 1040 and report the earnings on schedule C. You may take deductions against it such as web hosting costs, internet access costs, continuing education costs, website software purchases, etc. So you probably will be able to reduce your $800 to a nifty $0 net income. But if not, the net is subject to social security taxes reportable on Schedule SE.

The company paying the affiliate income is required to report the the amount to the IRS (if over $600 ) on a form 1099 (which is not a form required to be attached to your tax return). Generally when you sign up for affiliate marketing they ask for your social security number.

If the amount is less the $600 you may not get a 1099 but technically you are still required by law
to report it on your tax return. Again ordinary and necessary business expenses to create that income are fully deductable.

If you fail to report it - and the amount is under $600, there is no IRS audit trail and therefore, may never come up again, unless, of course you are one of the few unlucky ones that get picked out of a hat for audit and during the audit are requested to document where all the deposits came from in your bank account.

If you prefer not to take any business deductions against the income, you can report it on line 21 and write in the space provided "commissions". But you still must complete a form SE to cover the SE (social security taxes) on the amount.

Turbotax does a nice job of walking you through the tax preparation process with an easy to use wizard.

Linda Saltz, CPA
http://www.qbalance.com/Where_to_file_2003_1040_taxes.htm

[Linda Buquet]

Linda,

Thank you SOOOOO much for posting. Nice to hear from a CPA on these issues!

Thanks again!

[mediahound]

If you have specific questions, my advice would be to chat with your tax advisor and the managers of your affiliate programs.

Hey Karen, nice to see you on here!

We spoke regarding insurance leads a few months back.

- Jarred C.

[timmathews.com]

Nice Job on Making $$ last year with your affiliate programs!
If you sign up for mine, I'll send you a 1099, or I'll pay you in cash!
:D

http://www.blanketmall.com/Scripts/affiliate_offer.asp

[Karen Hudgins]

Hi Jarred,
Good to hear from you! If you are still interested, we are seeking partners for life insurance, long term care insurance, disability insurance, 401K rollovers, annuities, replacement windows, siding, roofing, and sunrooms. Please feel free to contact me at anytime. It would be a pleasure to work with you.

[desertratent]

You must report the Income from any source to the IRS. The Affiliate programs that you are with will send this information to the IRS. You can do this by completing the Schedule "C" of the tax return. If you don't know how to do that I would take you information to a tax preparer and have them do them. Make sure that you take all receipts of how much you got from the Affiliate sites, all the information on how much you spent on your domain name, host server provider and also provide them with how much time you spent on developing your web site. If I had a choice of which tax preparer to take them to, I would use H&R Block.

[vfaulkner]

When I first started my account,CJ sent me a tax form via email that I had to fill out and fax or mail back to them to be kept on their files.

[Crafty-Ones]

I'm glad to see another CPA has responded already.
I am also a practicing CPA in PA.

Linda seemed to have covered all of your questions very well, I just wanted to comment on a couple comments made regarding the W-2's.

A W-2 is a report of wages for employees. As an employee, the employer is responsbile for withholding and remitting taxes from your paycheck. W-2's are required no matter what the amount is.

A 1099 is issued when taxpayers receiving the payment are considered an independent contractor. No taxes are withheld and most often the taxes are subject to self employment tax, net of expenses. Businesses are required to remit 1099's for any partnership or inidividual they have paid more than $600 to for services.

If you received a 1099 from any of the affiliates, you must report it on your tax return. The IRS will match the social security and you will be audited. If they did withhold federal income tax (as some will) the 1099 then needs to be attached to the return, otherwise, it does not.

If they don't issue a 1099, you still are supposed to report the income, but as Linda says, it may go unnoticed, unless you get a random audit. I never suggest that, since the penalties and interest are severe enough not to take the risk.

The commissions are taxable, however, may be also considered passive income and not be subject to self employment tax, if you have other earned income.

Hope that helps a bit more.
Tami
http://accountingmgt.com