How to handle taxes related to affiliate marketing?

Question

I'm running a U.S. registered business, selling intangible services online.

Part of my business is offering an affiliate account registration to individuals and companies who wish to earn money through referral sales.

I have a couple of questions regarding taxes handling for affiliates. I've done my search on the Internet but I'm still confused so I hope someone can clarify the following points to me:

1. Is it right that I request form W-9 or form W-8BEN (for non U.S. citizens) from the affiliate users before sending them payments?
2. I know that I have to send form 1099, but I don't know where does this form should go to. Should I send it to the IRS or the affiliate user or both?
3. Should I send form 1099 once a year or each time I make a payment to the affiliate?
4. Do I have to send form 1099 when the money earned by the affiliate hit a certain threshold or I have to send it anyway?
5. Is there any other forms or documents to request from or send to the affiliate user or the IRS?

Answer 1

Is it right that I request form W-9 or form W-8BEN (for non U.S. citizens) from the affiliate users before sending them payments?

Not just OK. Required.

I know that I have to send form 1099, but I don't know where does this form should go to. Should I send it to the IRS or the affiliate user or both?

Both. There's also form 1096 that you need to send to the IRS. Read the instructions.

Should I send form 1099 once a year or each time I make a payment to the affiliate?

Once a year. Read the instructions.

Do I have to send form 1099 when the money earned by the affiliate hit a certain threshold or I have to send it anyway?

$600 or more requires the form, but you can send for any amount. Read the instructions.

Is there any other forms or documents to request from or send to the affiliate user or the IRS?

There may be additional forms. Especially if the recipient is a foreign person and you withhold taxes. Talk to your tax adviser.