Affiliate marketing is a way to make money by referring customers to different websites. You will get paid a commission for any sales that come from your link. If the affiliate company is a legal business, then yes, it will send you a 1099 when the affiliate has more than $600 in sales during a calendar year.
Types of 1099 Forms
There are 2 kinds of payouts possible when you’re marketing affiliate products:
- A 1099-MISC is similar to the W-2 that employers send out, stating that you have made a certain amount that year working with them.
- A 1099-K is for when a company pays you through a third-party payment network, and the network is responsible for sending your tax form.
When is a 1099 Issued?
On the surface, it’s easy to determine when to issue a 1099-MISC. If you pay a subcontractor (or affiliate) more than $600 in a single calendar year, a 1099-MISC is required, unless they live outside the United States or are a corporation. The PayPal gray zone says that any payment card organization must begin reporting earnings in excess of $20,000 on form 1099K if those earnings were from at least 200 individual transactions.
Amazon will issue a 1099 form by January 29th to any associate who received payments of $600 or more or for payments where taxes were withheld in the previous calendar year, unless you are an exempt entity like a corporation.
Tax Responsibilities for Affiliate Marketers
As an affiliate marketer, you are paid as a “1099 Contractor” for tax purposes. This differs from a W-2 Employee. Contractors do not have any taxes withheld from their income by their employer. Most marketers will work through multiple affiliate programs, meaning you might get multiple 1099s from different brands or advertising networks – either a 1099-NEC or 1099-K.
Sole proprietors, LLCs, and partnerships are subject to the 1099-MISC rule, provided the $600 earnings threshold is met. You’ll only need to issue a 1099 for direct payment methods such as cash, check, or bank transfers. You don’t need to report credit card or third-party transaction network payments.