Taxes for Online Business Owners: IRS Accepts No Excuses
Every business large or small, online or off will have to deal with taxes. Taxes for online business owners are extremely similar to taxes for any business, but with one small exception. Brick and mortar businesses know who they are paying. They meet them and see them. However, an online business owner may know nothing more than an e-mail address and that is where the mistakes are made.
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Taxes and The Online Business Owner
We were trained to believe taxes were difficult and it should be left to the professionals. We are told the IRS is an evil entity that is waiting to devour our mistakes.
The truth is an expert doesn’t have to do your taxes and the IRS really is there to help. Checking out their tax page for small business owners actually turns up some useful information. In fact, you will find all the forms you need right there on the IRS site along with articles on how to use them.
As a business owner, you need to learn at least the fundamentals, including how to pay affiliates.
Learning the Fundamentals of Taxes
Just by reading this you have taken a giant leap forward. You have broken through the boring barrier and are working on educating yourself. Before we go further though, it is important to realize this is not tax advice. This is a very minimalistic view of taxes and should only be seen as a starting point.
Once you finished reading this, you need to check out your state tax laws. Each state has its own rules and regulations which cannot be covered here. This is especially true if you are an LLC.
Minimal IRS Records for Affiliates
No matter what state you live in or what type of business your company is, the IRS requires the same things for all online business owners regarding affiliates.
First, you must have a way to track all your affiliates, their tax information and the amount you pay them. Ideally, you will use software for ease of use, accuracy and tracking. However, software is not required.
The IRS does require a W9 and a 1099 for every affiliate or independent contractor whom you pay $600 or more in a given year. Think of it this way: anyone “working” for you will need both of these documents.
The 1099 can only be filled out if you have a signed W9. Since the IRS accepts digital signatures, obtaining and storing these records should be easy enough. Just make sure you have the W9 on file before you pay an affiliate.
Affiliate Tracking Software Makes Tracking Easy
The IRS does not accept any excuses. You must have the documents available on demand. While tracking all of the affiliates, their documents, and their pay may sound daunting, software will make the task a lot simpler.
You can ensure you have all the information you need by using free affiliate tracking software. Take your already existing mass pay file and feed it into the software. The software will take care of the rest. You won’t have to worry about finding a W9 again. The software will only authorize payments to those affiliates with a W9 on file.