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Paying Taxes on Affiliate Earnings

guiltymarketing
Posts: 6
Joined: 10 Mar 11
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Paying Taxes on Affiliate Earnings

I live in the US and obviously all earnings fall under taxation by the IRS. I was just wondering what advice other affilliates could provide from experience in regards to claiming this income. Personal income vs. Business income at what point do you create a business tax ID, etc. I am in the early stages of being an affiliate so it would be nice to know how to go about claiming my low income now and at what point should I turn my "personal earnings" into a full-fledged business and what tax advantages apply to each scenario.

Just a thought if someone could provide some expertise on this topic. Thanks!

- Chad
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michellerana
Posts: 2372
Joined: 05 May 09
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Welcome to Affilorama, Chad! :)

You would need to talk with a local accountant since tax laws would depend on where you live.

Illinois has passed legislation to tax online sales made to consumers located in the state. The "Main Street Fairness Act" targets online retailers with Illinois affiliates. Illinois residents who make purchases online would need to report those purchases on their state income tax form and pay use tax.

In New York, any online retailer that generates more than $10,000 in sales via in-state sales affiliates must collect New York sales tax.

Washington started collecting taxes from online retailers that have voluntarily agreed to start collecting the sales tax in return for not being sued for back taxes.

As I previously stated, you would really need to seek an accountants advice ;)
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Michelle
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guiltymarketing
Posts: 6
Joined: 10 Mar 11
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I'm referencing income tax rather than sales tax. And yes state taxes are different but I'm talking federal taxes which are filed separately from your state taxes. I guess my question is in two parts:

1. (The Technical) How do you report these earnings on your taxes. Basically what section do you file them under (additional income).

2. (The Experience) At what point would you if ever find benefit from becoming an LLC or other company of the sort to receive additional tax benefits and what would those benefits be if any.

I guess I'm just reaching out for you affiliates out there who have been in the game for awhile to see what your opinions and/or experiences are on this. How do you guys run your businesses?
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sportakus
Posts: 67
Joined: 23 Nov 09
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I am not an accountant but any income over $600.00 needs to have a taxpayer ID. You can request one from IRS or just use social security number. If you make 600 or more you will receive a 1099 form from the entity in which you made the money. You have to file that 1099 and pay taxes on it at the end of the year.

You can be an affiliate without creating a business and just work like an independent contractor does. However, you leave yourself open to lawsuit draining all your personal income if there was ever a lawsuite. That is why you would want to incorporate eventually with LLC or S corp or standard C corp.

Plus having a business allows all the added business write offs. You can have business write offs as well as a sole proprietor or independent contractor.

A word of caution though. Incorporating is a pain. It requires a lot of work and more money. A lot of paper work has to be filed and year end reports. I have had an S corp and nothing but more expenses. I have heard an LLC is much easier and less paper work. Not as much legality.

This past year I just reported mine on 1099 and included my expenses like an independent contractor. With a business you will need to have an accountant and legal representation.

Untill the income flow is regular I would not create LLC. Once you create a business entity you have 3 yrs to make it profitable then the IRS would start to look at you if you have not made it profitable.

Finally, if you don't know how much you will pay you can have an accountant figure out an estimate and just pay estimated quarterly benefits to your state but the first year you are in business you would not have to worry about this as you do not know what your income will be regarding affiliate marketing. You would just pay state and federal at and of first yr. Once you have the first year under your belt then you will be able to know how much quarterly income you would owe to the state and feds. If you do not pay the quarterly then you can be fined with interest.

Michellerana is correct. If you have access to an account speak with them because the laws are changing with our tax codes, plus they can figure the taxes and know the forms.
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cecille.l
Posts: 7013
Joined: 25 Feb 11
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Thanks for bringing this up Chad! I have been wondering about this myself. Great inputs from Michellerana and Sportakus! Yes, I agree with Michellerana. The best way to go is to speak with an accountant in your area.

Have a great day!
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Cecille


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guiltymarketing
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Joined: 10 Mar 11
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Great post Sportakus! Thanks for the insight! I will definitely speak with an accountant when the time comes for that, just wanted to see what you guys have done in the past...thanks again!
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This topic was started on Mar 23, 2011 and has been closed due to inactivity. If you want to discuss this topic further, please create a new forum topic.