Do affiliates need to file a 1099?

If you’re an affiliate and receive commission payments from a vendor, you may need to report those payments on your tax return. The type and quantity of information that the vendor sends you will determine if you need to file a Form 1099.
If you were an independent contractor and not an employee, then the rules are different. For example, if your services as a freelancer or contractor account for more than 10 percent of your business income for the year, then you might be required to file a 1099-MISC. If you're an independent contractor or an LLC member receiving commissions, then yes, you will most likely have to file a Form 1099-MISC.
It’s important that you understand how each type of commission is treated by the IRS so that you file correctly. Read on for more information about when and how to file a 1099-MISC as an affiliate based on your circumstances as well as see our article

1099-MISC Basics

The 1099-MISC form is used to report miscellaneous income types, including royalties, interest, and non-employee compensation such as affiliate income. Businesses are required to file this form for the following types of non-employee compensation:

•  Payments over $10 in the course of the year to a non-employee for services rendered, or
•  Sales of property, or
•  Sales of stocks or bonds

If you received any of the above types of income in 2018, then your business is required to report it to you on a Form 1099-MISC. When you receive the form, it’s your responsibility to report that income on your taxes.

When to file a 1099-MISC

As an affiliate, you should file a 1099-MISC when you have received $10 or more from a vendor as compensation for your services, or when you have received a merchandising fee. This applies regardless of whether you’re an independent contractor or an LLC member. However, there are different rules for when a vendor must file a 1099-MISC form with the IRS.

For payments to you as a non-employee contractor, the vendor must file a 1099-MISC if your total payments exceed $600. If you’re a contractor, your vendor should issue you a Form W-9 and then, if you have at least $600 in total payments, they should issue you a Form 1099-MISC.

For merchandising fees, the vendor doesn’t have any taxable event and therefore doesn’t need to file a 1099-MISC. Instead, the vendor should report this payment on your Schedule C with your other miscellaneous income.

How to file a 1099-MISC

You are required to report each vendor that paid you $600 or more on a Form 1099-MISC. As an affiliate, you report these vendors on a Schedule C along with your other business expenses. You can use the same 1099-MISC vendor list for your Schedule C that the vendor uses for issuing you a Form 1099-MISC.

When you file your taxes, you should include the 1099-MISC on the line for “other income.” Then, you should enter the vendor’s name, their address, and their code or EIN. In Box 7, where the vendor has reported the amount they paid you, you should put that same amount.

1099-MISC rules for commissions and merchandising fee

If a vendor has paid you a commission or a merchandising fee, your vendor should issue you a 1099-MISC. Let’s say you’re a blogger who has signed up as an affiliate with an online retailer. The online retailer has paid you a commission on sales made through your blog. In this case, the online retailer is required to issue you a Form 1099-MISC for the amount paid as a commission. The vendor is also responsible for issuing this form if you receive a merchandising fee.

A commission is defined as a percentage of revenue. A merchandising fee is a one-time payment based on the terms of a contract between you and a vendor.
The 1099-MISC rules for commissions and merchandising fee differ from the rules for non-employee compensation.

Commissions paid to independent contractors

Vendors often have to issue a 1099-MISC form if they have paid you more than $600 as an affiliate. But the rules are different if you are an independent contractor.
In this case, the vendor is supposed to issue you a Form 1099-MISC if the total amount paid to you is over $600 and if you’re not an employee.
A vendor is considered to be an employer if you’re an employee of the company. For example, if you’re writing articles on a freelance basis and you’re an employee of the company paying you, then the company is required to issue you a W-2 form.
That means if you’re an employee, the company is supposed to withhold taxes from your income. As an independent contractor, you’re not supposed to pay any taxes.

Merchandising Fee Paid to Independent Contractors

Vendors often have to issue a 1099-MISC form if they have paid you more than $600 as an affiliate. But the rules are different if you are an independent contractor. In this case, the vendor is supposed to issue you a Form 1099-MISC if the total amount paid to you is over $600 and if you’re not an employee.

A vendor is considered to be an employer if you’re an employee of the company. For example, if you’re writing articles on a freelance basis and you’re an employee of the company paying you, then the company is required to issue you a W-2 form. That means if you’re an employee, the company is supposed to withhold taxes from your income. As an independent contractor, you’re not supposed to pay any taxes.

Commission paid to LLC members or employees of an LLC

If you’re an affiliate who is a member of an LLC, then the LLC must pay you a W-2 form. This means that if your LLC has paid you a commission, then the LLC must issue you a W-2 form.

This doesn’t apply if the LLC is paying you a non-employee compensation such as a commission, interest, or a sales fee. The LLC should issue you a 1099-MISC form if they have paid you more than $600 and you are an independent contractor.

If you are an employee of an LLC, then the LLC must pay you with a W-2 form. In this case, the LLC must pay you a W-2 form for any commission you have received.

Taxable fringe benefits of being an affiliate

If you receive any type of taxable fringe benefit from a vendor, such as travel or merchandise, then the vendor must report that benefit to you and the IRS on Form 1099-MISC.
The vendor will report the amount of the benefit to the IRS and to you on a Form 1099-MISC. You then report these taxable fringe benefits as income on your taxes.

When you’re an affiliate, it’s important to understand the 1099-MISC tax form. When you receive a 1099-MISC, you should also report it on your taxes as income. If you’re an affiliate who has received a 1099-MISC, then you should include it on your tax return as other income.

To help you comply with these rules, you can use a software like TurboTax which will walk you through the process and help you file correctly.