Paying Taxes on Affiliate Earnings
Like earnings from Google Adsense and other banner networks, profits made through Commission Junction, Azoogle, and other affiliate networks / programs are considered taxable income. Any and all taxable income is subject to Federal Income Tax, State Income Tax, and most likely Self Employment Tax (This one depends on how your business is structured). Make sure to visit each of our pages on these taxes to learn about them and how to pay them.
The most important thing to keep in mind when thinking about your taxes is to properly document all of your expenses. If you’re using commission junction, azoogle or another affiliate network / program, odds are you’ll be spending quite a bit of money on advertising to generate sales / leads. Every penny you spend promoting the affiliate programs you’re working with is tax deductible. At the end of the year, these companies send out tax documents to you showing what they paid you, and you’ll need to report this number on your tax return as business revenue. If you don’t properly document all of your expenses and report them on your tax return as expenses, odds are you’ll end up paying a lot more in taxes than necessary. In fact, you could end up losing money, as you may end up paying taxes on your total revenue rather than your profit. Even if you aren’t spending money on PPC, you could be spending money elsewhere to bring in those leads. Paying someone to write 100 articles and distribute them across popular article directories would be considered a marketing expense, so keep track of it and list it as an expense at the end of the year!