How to File Taxes for Affiliate Marketing Income

Becoming an affiliate and promoting products on your website or social media channels can be a great way to generate some extra income. However, if you’re participating in affiliate marketing as a business venture (or hoping to), you’ll likely need to file taxes. Understanding what tax obligations you have and how to report them is important, especially because there are different ways that you can report your affiliate earnings.

If you have registered your business entity as any of the common types such as a sole proprietorship, partnership, S corporation, or a C corporation, then the type of taxes that you file will depend on the legal structure of your business. The first step is determining which type of entity you have and then following the applicable tax instructions for that type of company.

Topic Index
  1. Managing Taxes in Affiliate Marketing
  2. Sole Proprietorship Tax Requirements
  3. Partnership Tax Requirements
  4. Corporation Tax Requirements
  5. LLC Tax Requirements

Managing Taxes in Affiliate Marketing

As an affiliate marketer, you will likely have the following tax obligations:

  •  Self-employment taxes - If your affiliate income is greater than the amount you earn from a full-time job, then you will likely have self-employment taxes due. This means that you will need to pay for both your employee and employer portion of Social Security/Medicare taxes. This can be as much as 15.3% of your affiliate earnings.
  •  Sales taxes - If you live in one of the 24 states that collect state sales tax, you will need to report your affiliate earnings and pay taxes on any sales that you make.
  • Other considerations - Legal and accounting fees, travel, and other business expenses are deductible, you will likely have to report those as business expenses on your taxes. Depending on your situation, there may be other tax obligations that you will need to consider as an affiliate marketer.

Sole Proprietorship Tax Requirements

If you are operating under a sole proprietorship, any affiliate marketing income that you make will be reported on your 1040 Schedule C form. Because you are running a sole proprietorship, it’s likely that your business expenses will exceed your revenue, meaning that you will likely need to pay income tax on your affiliate earnings.

Affiliate marketing income is reported on line 17 of the 1040 Schedule C form. If your expenses exceed your revenue, you will need to report that on line 36.

Partnership Tax Requirements

If you have formed a partnership in order to do affiliate marketing, it’s likely that you will have to file an alternative partnership income tax return (Form 1065). Your partnership will likely have to pay self-employment taxes on any affiliate marketing income that is earned.

If your partnership has net earnings (revenue minus expenses), those will be reported on line 10 of the Form 1065. If your partnership has net losses, those will be reported on line 26.

If your partnership has net losses, then those are generally claimed on the partners’ individual tax returns. In this situation, any net losses that are claimed on your partners’ individual taxes will reduce the amount of tax that your partnership owes.

Corporation Tax Requirements

If you form a corporation for your business, any affiliate earnings that are distributed to the shareholders will be taxed at the 15% long-term capital gain rate. This is generally a lower rate than what an individual would pay on affiliate income.

Affiliate income is reported on the corporation’s 1040 Schedule E form. If the affiliate income is greater than the corporation’s expenses, those will be reported on line 12. If the corporation has net losses, those are reported on line 22.

LLC Tax Requirements

If you have formed a limited liability company, the LLC will likely have to file a 1065 form if it has more than one owner. It is also likely that the LLC will have to pay self-employment taxes on the affiliate marketing earnings that are distributed to the owners.

If the LLC has net earnings, those will be reported on line 10 of the 1065 form. If the LLC has net losses, those will be reported on line 26.

Affiliate marketing can be a great way to generate some extra income. However, if you’re participating in affiliate marketing as a business venture (or hoping to), you’ll likely need to file taxes. Understanding what tax obligations you have and how to report them is important, especially because there are different ways that you can report your affiliate earnings.

If you have registered your business entity as any of the common types such as a sole proprietorship, partnership, S corporation, or a C corporation, then the type of taxes that you file will depend on the legal structure of your business.

The first step is determining which type of entity you have and then following the applicable tax instructions for that type of company.

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