Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Feb 24

    Affiliate marketing can be a great way to increase your sales by letting other people sell for you.  Oftentimes you have to pay the affiliate a significant portion of your profits and you end up with a lower profit margin but a higher net profit. The general idea is that your affiliate may have a connection to markets you don’t and they spend their time/money/efforts to reach customers you would ordinarily not be able to reach and make a connection with.

    But it’s important to keep abreast of regulations. If you aren’t careful, your dream affiliate marketing campaign could turn into a nightmare encounter with the Internal Revenue Service. As your affiliates earn money from your business, there are obligations created for your business. Obligations to the IRS.

    Whenever an affiliate earns more than $600 in commissions during the calendar year the business has an obligation to send them (with a copy to the IRS) a Form 1099-MISC. Failure to keep good records and report this information accurately can result in stiff penalties.

    The penalty for failing to file 1099s can be $50 per 1099 up to a maximum of $250,000 ($100,000 for a qualifying small business). However, if the IRS decides that your failure to file the required 1099s is due to intentional disregard, the penalty at least doubles to $100 per return with no maximum penalty.

    The trouble with 1099s is avoidable. It only takes a simple system in place and being adhered to. Unless your affiliate marketing program is limited to marketers you can count on your fingers, then I suggest using software to help you keep track of the amount paid to each affiliate. There is software out there designed to help you manage your affiliate program and most of those will help you with the reporting details, but not all do a good job. Consult with a professional to make sure you are fulfilling your obligations to the IRS.

    Have each affiliate sign a W-9 for you when they first sign on. Make it a rule – no affiliate gets their first check, or any check without a W-9. The W-9 is designed to give you the necessary information, with regard to name, address and federal ID number, needed to complete an accurate 1099. Whether you use software or pay a third party to handle your affiliate tax reporting, ultimately, you are responsible. Make sure you understand what needs to be done even if you’re not the one doing it.

    This is a case where the best defense is a good offense. Make it your game plan to be sure your affiliate program is in compliance with IRS regulations and you can avoid the trouble with 1099s.

  • Feb 10

    The Internal Revenue Service recently announced the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

    Beginning January 1, 2012, the standard mileage rates for the use of a vehicle will be:

    • 55.5 cents per mile for business miles driven,
    • 23 cents per mile driven for medical or moving purposes, and
    • 14 cents per miles driven in service of charitable organizations.

    The rate for business mileage is unchanged from the mid-year adjustment that became effective July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

    The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study.

    Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

    However, a taxpayer may not use the business standard mileage rate for a vehicle after deducting MACRS depreciation or Section 179 for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles simultaneously.