Why Businesses that Pay Affiliates Need Protection

Why Businesses that Pay Affiliates Need Protection

When you finally get your affiliate program up and running, you quickly discover another problem you must deal with. You have to determine how you will pay affiliates. Many business owners think, "No problem. I will use the mass pay feature of PayPal." While this works to physically pay your affiliates, it does nothing to protect you.

Protection? Why Do Business Owners Need Protection from Affiliates

On the surface, it looks like the business owner has all the cards and it would be the affiliate who needs protection. They are the ones putting in all the work in hopes the new affiliate program will actually pay them--and pay them when promised. However, if you scratch the surface just a little, you will see why a business needs protection.

Generally, businesses first launching affiliate programs join an affiliate network. This is easier because the network has the prestige and the reliability affiliates are looking for in a program. What they don't know is many of these networks do not monitor the tax documents.

Someone Must Track Tax Records for Affiliates

This is more than a name, address, e-mail and payment info. A business needs a signed W9 from each affiliate. Without this one document, a business owner will have to pay taxes on behalf of the affiliate. This could cost a new business thousands and a prosperous affiliate program millions in taxes, penalties and fines.

Businesses need to protect themselves from non-tax paying affiliates. This could be anything from simply not file a tax return to giving false information on requested forms. The only way a business is protected from such behavior is with a signed W9.

How to Protect Your Business

Keeping track of all the affiliates and the new affiliates signing up can be quite overwhelming with everything else a company has to do to keep an affiliate program going. However, it is not something that can be overlooked or underestimated. When it comes to the IRS, a business cannot be too careful.

Businesses seeking help with tracking tax documents on affiliates do have affordable options. Along with outsourcing, businesses have the option of using free tracking software. The software keeps track of the W9s, the payments, and will print out 1099s at the end of the year. All the business owner needs to do is add one step to the payment process.

Instead of taking the mass pay file directly from the affiliate network and putting it into PayPal or Quicken, the business loads the pay file into the software. The software sorts out affiliates who have filled out the appropriate forms and puts them on a new ready to be paid list. This list is then uploaded into Quicken or PayPal as normal. The other affiliates are sent an e-mail stating money is waiting upon the completion of appropriate documents.

Whether your business is new to affiliate program management or just starting out, tracking the affiliates is vital. Don't pay taxes on the behalf of affiliates. Only pay what you have to and keep your money in your hands.

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