This is a cross-post, originally posted in Webmasters.Stackexchange.com but it was suggested I post here instead:
My question is basically this: I have an idea for a web service that would potentially allow affiliates to earn money. What I'd really hope to avoid is actually having to collect things like their Social Security Numbers, EIN's, etc, let alone any of the other compliance type issues that could arise.
I'm wondering a couple of things.
First: The need to issue 1099's doesn't actually arise until you're paying out $600 or more in a given year. Could I feasibly just let the program run, but only make the requirement of providing an SSN for tax purposes kick in when the affiliate is going to go over the limit? Ie, for the first $550, no SSN checks required, but after that, they need to provide this info to receive additional payments?
Second: If I only make payments through a service like PayPal, who I presume has crossed all the T's and dotted all the I's, does this alleviate my need to do any additional checks on people (not that I even know what checks would be made).
Third: Going hand in hand with the only making payments through PayPal idea - If i accurately record payments to affiliates as Services provided, does PayPal take care of 1099's as part of their role? In that I would only have to report payments made to PayPal, and it would be on them to report payments made to the ultimate beneficiary?
This isn't a business that's been launched, but I'm trying to think out issues beforehand, and this is the biggest one I can think of - I would personally rather not have myself or anyone one on my team even be able to access anyone's SSN's, but if it moved forward, I would obviously want to do so in a way that was compliant with the IRS and any other regs.
Any thoughts or guidance would be appreciated, unless it's "contact an Accountant" - I already know that's the most correct answer, I'm simply wondering if anyone else has gone down this road and can save me a little time and money on this, as this is still just idea phase, not operating business phase.