Taxes For Online Business Owners – A Real Life Story Behind the Numbers

You will hear many facts and figures about how taxes for online business owners are important. You can read boring IRS documents filled with laws and statistics. However, nothing brings the importance of taxes home like the story of one small business.

The Meager Beginnings of a T-Shirt Company

A few years back, a divorced father of two was tired of spending every other weekend with his kids. He was tired of missing school play and ballet recitals of his two little girls. He decided he needed a new job, a new form of income.

As this guy was looking for something new to do, he came across a turn-key t-shirt business. This looked like something he could really get into so he started a website and began his own custom t-shirt business. That night OzzWear was born

The Company Expands and an Affiliate Program is Born

After working day and night to get the company running, the little t-shirt business takes off. The divorced dad is able to quit his day job and run the t-shirt business full time. Excited and wanting to expand, he starts an affiliate program. He joins a top affiliate network and quickly recruits dozens of affiliates.

Before he knows it, the affiliate program is a success. He is paying some affiliates hundreds of dollars a month. He expands and so does the affiliate program. Everything looks great!

The Tax Man Calls

When tax time rolls around, the divorced dad contacts his accountant. The accountant informs him of the need to send out 1099s to all his affiliates that made over $600. Of course, this is not a problem. He knew that his affiliate network made all the affiliates fill out the forms before they were allowed to join. All he needed to do was get the information or so he thought.

When he gave the information to the accountant, the accountant informed him some of the information was fake. People had entered all ones or gave obviously fake addresses. The divorced dad was shocked. How could this have happened? He was now faced with paying over $10,000 in other people’s taxes.

In Comes the Consultants

Luckily, the dad was able to reach an agreement with the IRS to make installments (with interest.) However, he knew he could not let this happen again. Therefore, he immediately went out to find an affiliate management team to help him out.

They recommended affiliate management software. According to them, if he implemented the software, he would not have to worry about such things again. The software would ensure every affiliate had a signed W9 and at the end of the year, it would give him all the 1099s he needed. This would take care of future tax issues.

The affiliate company could manage the software, recruit affiliates, and track sales and promotions. While the team was an added expense, they proved worth every penny. Now the divorced dad attends recitals and sees his kids all the time. OzzWear custom t-shirts had a rough start but it was definitely worth the growing pains.

Source by Mike J. Filsaime

Diana McCalpin is an accountant who manages a Certified Public Accounting Practice in Laurel, Maryland which performs audit, accounting and tax services to customers. She loves to share information with clients to help them grow their businesses and be profitable.

Share this

Leave a Reply