Pay Affiliates and Keep the IRS Happy Easily
Sure, you only need the e-mail to pay an affiliate via PayPal. But an e-mail address doesn’t tell you anything about that person. You may not even know their name! When tax time rolls around, how will you know who to send the 1099-MISC to? Federal law requires you to send a 1099 to anyone you pay more than $600 a 1099. Otherwise, you’ll end up effectively paying taxes on what you paid out in commissions!
You Need a W9 for Every Affiliate…Period
Federal tax laws require a signed W9 for all independent contractors (affiliates, virtual assistants, etc) who make $600 or more in a given year. Now, there is no way for you to know whom you will pay $600 or more at the beginning of the year. Therefore, you need to have all affiliates sign a W9 before you pay them.
Now, I know this sounds like more work and more stuff to keep up with. However, it really is simple to manage. You can get free software which will track all this information for you. Chances are, you already have everything you need to make this software work
Prerequisites for Affiliate Tracking Software
Like we said before, chances are you already have everything you need to make the software work. All you need is the mass pay file provided to you by your affiliate network. The software uses the mass pay file to track payments and tax info.
Instead of taking the mass pay file directly from your affiliate network and uploading it to your mass pay system like Quicken or PayPal, you load it into the software. The software does all the work and gives you a new mass pay file ready for uploading.
What the Software Does for You
The first thing the software does is sort your payee list into approved (have filled out the tax forms) and non-approved (have not filled out the tax forms) groups. Your new mass pay file has only the approved payees listed for payment.
Next, it takes the non-approved payees and sends them a notice. It tells them they have money waiting on them. However, the money cannot be released until the tax forms are filled out.
Finally, when the non-approved payees do decide to fill out the forms, it moves the affiliate to the “approve payee” list ready for payments. This means you never again have to pay someone you don’t know.
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