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Tax Info Questions (and Answers)

ohscrapohscrap Member Posts: 5
edited March 2010 in Affiliates
As an affiliate, I know that next year I'm going to have to pay taxes on the money I am making here. Would anyone that knows about small business, be willing to step up and advise us on the steps we need to take such as applying for a business license, EIN numbers or anything else we need to know?
TIA. =)


  • tiltyardtiltyard Member Posts: 10
    It's not that difficult. Business licenses may not even be needed. Check with your county/city administration office. In my county, there is no business licence required. In my neighboring city, no business license is required unless you have a business location - so if you work from home, there is no license required.

    A schedule C is all you have to add to your return. You'll need to file a 1040 or a 1040A and a schedule C if you make over $400. Keep track of your expenses, if you have any since this is primarily online. When you figure a schedule C, you'll also have to file a schedule SE (where you pay in your social security/medicare) but it's very simply and they are only one page easy forms.

    You can go more complicated if you think you will make enough to itemize deductions, deduct for your 'home office', etc but unless we are talking serious money like thousands and thousands, I'd go the uncomplicated route.

    By the way, just so you don't think I'm pulling this out of the air, I'm a bookkeeper with 20 years experience, an accounting and business management degree, and have operated our own hobby business for the past 5 years doing all the bookkeeping and taxes where we grossed over $750,000 in sales for the past 3 years. And, truth in advertising, the economy took it's toll in the past two years where we had to sell more and more for less and less so my husband and I closed our money-eating business in December for a simpler life - which leaves me more time for crafting!
  • VinylandVectorsVinylandVectors Member Posts: 4,344
    Thank you! This is very helpful!

  • ohscrapohscrap Member Posts: 5
    Thank you for your input. Before seeing this, I went to see a CPA. I told her how much I had made so far and she said I needed a business lic and a EIN number. Said that I would need to start paying quarterly taxes. Am I being taken for a ride?
    Email me privately if you wish. =)
  • ohscrapohscrap Member Posts: 5
    How to Report Taxes on Affiliate Income

    If you are making money with affiliate programs on your website, then you will need to declare that affiliate income on your taxes each year. If you make more than $600 from an affiliate program you are required to report it on your taxes. Most affiliate program companies will send you a 1099 if you have made over $600. But ultimately it is your responsibility to report your affiliate income on your taxes.

    Step 1
    At the end of the tax year you should look at your affiliate program accounts and try to get totals for the amount you have earned from each of them. This will give you an idea of which affiliate programs you will need to report on your taxes. Any that you have earned over $600 from you will need to report.

    Step 2
    Watch for 1099s. Most affiliate programs send out 1099s to people that have earned over $600 during the year. Instead of using your data to report your affiliate income on your taxes you should wait to get 1099s in case you have miscalculated something.

    Step 3
    If you think you should have gotten a 1099 from some affiliate companies and you did not, then you will need to contact them. You can ask them if they have sent you a 1099 as it is possible that yours got lost or that they filed for an extension. If they have, you can ask them to re-send it. If they have not, you can ask when they expect to send you one. If you do not get a 1099 at all you can still claim the affiliate income on your taxes.

    Step 4
    Use IRS schedule C or C-EZ to report your affiliate income on your taxes. Schedule C is to be used if you made more than $5,000 in affiliate income. If you made less than $5,000 in affiliate income you can report it on schedule C-EZ. You can get a copy of schedule C and C-EZ from the IRS website. Be sure to also get the instruction booklet to guide you through filling out the form.

    Step 5
    When you fill out your IRS form 1040 be sure to also fill out IRS form schedule C or C-EZ. You will take your 1099s and add up the total amount of affiliate income that you have earned as listed on the 1099s. Your affiliate income will be reported on the line listed as "Gross Receipts" on schedule C or C-EZ.

  • juliefes_ID1966juliefes_ID1966 Member Posts: 340
    Be sure to put away at least 25% of your Affiliate income for paying your taxes and social security taxes. Set aside more if you are in a higher income tax bracket. Many crafters have found that even a little income from their crafting business can put the total household income into a higher tax bracket. This could cost you money instead of making money. Your tax person should be able to help you plan for the coming year. Even Tax software can help.
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