Looming around the corner is the dreaded deadline for filing your income taxes — this year April 16 instead of the usual April 15, which falls on a Sunday. While that may be the tax deadline for individuals, the affiliate program manager has several other tax deadlines to meet.
The Internal Revenue Service requires companies that have paid individuals or affiliates $600 or more within a calendar year to file a 1099-MISC form. So what’s the next step? I’ve compiled some quick guidelines for you.
What’s a 1099-MISC Form?
The IRS requires that companies file a 1099-MISC form for individuals who have been paid $600 or more in a calendar year for rents, services, and other income payments. A 1099-MISC form is sent to each individual or individual affiliate (not corporations) for his or her tax filing purposes, and affiliate program managers must file a summary Form 1096 along with a copy of the 1099-MISC with the IRS (and certain state governments, where applicable).
The deadline to mail these forms to your affiliates was January 31, 2001. Penalties may apply for not filing the 1099-MISC in a timely manner, so please make sure to contact your tax adviser for detailed information.
The most important piece of information reported on the 1099-MISC is the Tax Identification Number (TIN). This information will vary depending on whether the affiliate is a corporation or an individual or is an international affiliate.
Individual Affiliate Versus Affiliate
Individual affiliates are not incorporated or registered as a business and usually use their Social Security Numbers (SSNs) as their TINs.
An affiliate that is incorporated or registered as a business has a Federal Tax Identification Number (FTIN).
What’s an ITIN?
Sometimes an individual who is not eligible to obtain an SSN (e.g., those who are not U.S. citizens or permanent U.S. residents) may be required to have a U.S. TIN; that’s where the Individual Taxpayer Identification Number (ITIN) comes in, and it’s issued by the IRS.
If an individual affiliate is required to have an ITIN, he or she can obtain one by filing a Form W-7 with the IRS. You can obtain copies of these forms by calling the IRS at 1-800-TAX-FORM (1-800-829-3676) or visiting the IRS Web site.
Getting the Information You Need
Many affiliate programs request this type of tax information during the affiliate sign-up process. However, many affiliates enter partial or incorrect data and sometimes none at all. Also, once they have received their payments, affiliates are less likely to provide you with accurate and timely information.
So most companies adopt the policy of requiring affiliates to first file a Form W-9. Before issuing the first check to the affiliate, the company can request the affiliate’s TIN from the IRS with the W-9. That way, when the January 31 1099-MISC filing deadline comes around, the company will have all the information for processing.
For additional information regarding the W-9, the IRS has an excellent overview: Instructions for the Requester of Form W-9.
Unfortunately tools and services to help you handle this reporting and filing process are lacking. Be Free prepares you to manage the process by helping merchants identify affiliates that will require a 1099-MISC form for revenue filing. However, the affiliate program manager handles the actual filing of forms and tax compliance. None of the affiliate service providers offer IRS tax regulation advice, but they support questions about their individual software or tools to make the process easier for you.
The IRS offers an easy-to-use interface for locating different taxpayer resources, including a database of forms, toll-free assistance numbers, and walk-in assistance locations.
Remember, the IRS updates forms and regulations on a yearly basis. Keep this article to help you prepare for next year’s tax season, communicate with your affiliates, and collect the right tax information from them ahead of time.
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