When I was recently signing up for an affiliate program, I noticed that they made note of the 1099-MISC form and I had absolutely no idea what that was. After doing some research, I found that the 1099-MISC form is sent to freelancers and contractors by the companies that pay them. Here’s what I learned:
The 1099-MISC is very similar to the W-2 that employers send out. For example, if you work at Microsoft, they will send you a W-2 form at the end of the year stating that you have made $60,000 that year working with them. If you also work at Best Buy part-time, you will get a W-2 form from them stating that you have made $12,000 that year. It is then your responsibility to claim this income on your taxes.
In the case of the 1099, not every affiliate will receive one. You have to make at least $600 in a calendar year from a single company for them to send you a form. For example, if you are part of the FatCow Affiliate Program (which pays out $100 per sale) and make $800 that year, they will send you a 1099 form in the mail to fill out and forward to the IRS. If you are also a member of the CommentLuv Premium Affiliate Program but only make $85 from that particular program, you will only get a 1099 form from FatCow. However, if you make $800 from FatCow, $85 from CommentLuv, and $1,200 from Host Gator, you will recieve separate 1099 forms from FatCow and Host Gator that should be filled out separately.
1099 Forms do not include information like income taxes and federal or state taxes. It is the responsibility of the freelancer or affiliate (i.e. the person being paid) to report their income to the IRS.
Nice article Ian.
Spot on with the 1099 facts.
Affiliate commissions is money earned and the government still wants their cut.
Honesty is the best policy when self employed.
This is true. I’m sure there are many people out there making tons of money from affiliate programs and advertisements and collecting unemployment…
Great post! I get one with my Scentsy business and then of course any company I make $600+ from. We do still need to claim stuff even if we don’t get the form but it makes it easier when we do.
Yes, even if you only make $100 from AdSense in a single year, you still have to mark it as income, no matter how embarrassing it may be! Google won’t send you an official 1099 unless you make $600.