You pay affiliates by collecting a tax form before the first payout, tracking commission against your billing system so the amount is not in dispute, and then sending money through a rail that can handle a lot of small international payments at once. For US programs the rule that changed this year is the reporting threshold: for tax year 2026 you issue a 1099-NEC to each US affiliate you paid $2,000 or more, up from the old $600 line. Most affiliate payout guides still say $600. The practical order is always the same: collect the W-9 or W-8BEN at signup, gate payout eligibility on it, pay monthly on a fixed date after a refund holdback window, and keep the payout records where your accountant can reach them in January.
Last updated August 2026.
The 1099 threshold changed for 2026, and almost nothing online says so
This is the part worth getting right before anything else, because it is new and because the guidance you will find on most affiliate blogs is out of date.
Until tax year 2025, US businesses had to file a Form 1099-NEC for any non-employee they paid $600 or more during the calendar year. Affiliates count as non-employees, so that captured almost anyone with a working program. Section 70433 of the One Big Beautiful Bill Act, signed in July 2025, amended Internal Revenue Code sections 6041(a) and 6041A(a)(2) and raised that threshold to $2,000 for payments made on or after January 1, 2026. From 2027 the figure is adjusted for inflation each year.
Two things follow. First, a lot of small affiliates who used to generate a form for you no longer do, which is a genuine reduction in year-end admin for programs with a long tail of people earning a few hundred dollars. Second, and more important: the change is about reporting, not about tax. Your affiliates still owe income tax on every dollar you pay them whether a form is issued or not, and you still deduct the commission as a business expense either way. Nothing about your bookkeeping changes. Only the paperwork trigger moved.
One caveat that catches people out: some states set their own, lower reporting thresholds and did not follow the federal change. If you have affiliates concentrated in a particular state, check that state's rule rather than assuming the federal number covers you.
This is general information rather than tax advice. The thresholds and deadlines here are accurate as of August 2026, but confirm your specific situation with a CPA before you file anything.
Collect the tax form before the first payout, not in January
The single most common operational mistake in affiliate programs is paying people first and chasing their paperwork later. It feels friendlier and it costs you a miserable week every January, when you are emailing strangers who earned $3,000 eight months ago asking for a taxpayer identification number they have no incentive to send you.
Do it the other way round. Put the form in the signup flow and make a completed form a condition of payout eligibility, stated plainly in your affiliate terms. Nobody objects to it at signup, because at that point they want to be paid and the effort is two minutes.
- US affiliates, whether individuals or companies, complete a Form W-9. That gives you the legal name, entity type, and TIN you will need if they cross the reporting threshold.
- Non-US affiliates complete a Form W-8BEN (individuals) or W-8BEN-E (entities). This documents that they are foreign persons, so no 1099 is required. Depending on the type of income and any applicable treaty, withholding may apply, which is a conversation for your accountant.
Collect the form even from affiliates you expect to stay small. The $2,000 threshold is measured across the whole calendar year, and a partner who earned $80 a month in the spring can have a launch in October that puts them over it. Backfilling a W-9 in January from someone who has since gone quiet is exactly the situation you are trying to avoid.
What each payout method actually costs you
Affiliate payouts have an awkward shape: many recipients, small amounts, spread across countries, repeating every month. That combination is what makes ordinary business payment methods a poor fit.
| Method | Good for | Where it hurts |
|---|---|---|
| PayPal mass payouts | Reach. Most affiliates already have an account, and bulk payout files let you send hundreds at once | Fees on cross-border transfers and currency conversion, and accounts do get limited or frozen without much warning |
| Wise bulk transfers | International affiliates. Better exchange rates than most alternatives and clear per-transfer pricing | Recipients need to supply full bank details, which is more friction at signup than an email address |
| Bank transfer or ACH | Domestic US affiliates being paid larger amounts | Painful at volume. Fine for twelve affiliates, unworkable for four hundred without automation |
| Platform-managed auto payouts | Removing the job entirely. Your affiliate tool pays everyone and invoices you once | Carries a processing fee on top of your subscription. Tolt charges 2% on automated payouts, for example |
| Account credit or coupons | Customer referral programs where the reward is a discount rather than cash | Not a payout at all in tax terms for the recipient in many cases, but check the treatment. Useless for professional affiliates, who want money |
Whichever rail you pick, set a fixed payout date and a holdback window. Most SaaS programs pay monthly, roughly 30 days in arrears, so that refunds and chargebacks in the first month claw back automatically instead of you trying to recover money you have already sent. Publish the schedule in your affiliate terms. Predictability is a bigger driver of affiliate loyalty than a slightly higher commission rate.
Which affiliate tools handle the tax paperwork for you
Tax form collection and 1099 filing are the features buyers most often assume are standard and most often are not. We checked the current pricing and feature pages in August 2026.
| Tool | Collects W-9 / W-8 | Files 1099s for you | Payout rails |
|---|---|---|---|
| Tolt | Yes | Yes, from the Growth plan ($99/mo) | PayPal, Wise, local bank, wire, crypto. Auto payouts carry a 2% fee |
| FirstPromoter | Yes, W-9 and W-8BEN | Not advertised | Bulk PayPal and Wise, one-click Stripe and PayPal payouts, managed auto payouts |
| Rewardful | Not published as a built-in feature | No | Managed payouts available. Requires Stripe or Paddle billing |
| Partnero | Not published as a built-in feature | No | Own PayPal or Wise account, or Partnero-managed payouts at a 7% processing fee |
If you pay a meaningful number of US affiliates, the filing row is worth real money. Issuing forms yourself is not difficult, but it is fiddly, deadline-driven, and lands in the same January week as everything else your finance function has to do. The full trade-off between the two tools that take opposite approaches is in our FirstPromoter vs Tolt comparison, which also covers the revenue caps that decide which plan you land on.
One thing none of these tools do is find the affiliates in the first place. They all start from the assumption that you already know who should be promoting you, which is the part most programs are actually stuck on. That gap is the reason affiliate recruitment software exists as a separate category, and why our own affiliate management platform leads with discovery rather than tracking.
Deadlines, e-filing, and the bit that surprises small programs
For tax year 2026, Form 1099-NEC copies go to both the IRS and the recipient by February 1, 2027 (the usual January 31 deadline falls on a Sunday). Unlike some other forms in the 1099 series, there is no later deadline for the IRS copy, so treat it as one date.
The requirement that catches people out is electronic filing. Since tax year 2023, any business filing 10 or more information returns in aggregate must file them electronically. Aggregate is the operative word: the count combines W-2s, 1099-NECs, 1099-MISCs, and most other information returns rather than counting each type separately. So a company with three employees and eight qualifying affiliates is over the line and cannot mail paper forms.
The IRS provides a free filing portal called IRIS, but using it requires a Transmitter Control Code, and the application can take up to 45 days to process. If you are planning to file your own returns for the first time, start that application in the autumn rather than the third week of January. Most teams above a handful of affiliates end up using a filing service or an affiliate platform that files on their behalf, simply because the calendar is unforgiving.
Keep the payout records somewhere your accountant can actually use them. Commission is a deductible business expense and it needs to land in your books at the right time, which means monthly exports rather than a scramble at year end. The same forms you issue then show up on the recipient's side, where an affiliate running their own numbers will be feeding those 1099s into their return alongside everything else they earned.
How do you pay affiliates?
You pay affiliates by tracking each referred sale against your billing system, waiting out a refund holdback period of around 30 days, then sending the accumulated commission in a batch on a fixed monthly date. Most SaaS programs use PayPal or Wise for the transfer, or let their affiliate platform run automated payouts for a processing fee. Collect a W-9 or W-8BEN before the first payment.
Do I need to send a 1099 to my affiliates?
Yes, if the affiliate is a US person and you paid them $2,000 or more during tax year 2026. That threshold rose from $600 under the One Big Beautiful Bill Act and applies to payments made on or after January 1, 2026. Foreign affiliates who have filed a W-8BEN do not receive a 1099. Affiliates below the threshold still owe tax on what they earned; you simply do not have to issue a form.
How often should you pay affiliates?
Monthly, on a published date, roughly 30 days after the commission is earned. That delay covers your refund and chargeback window so you are not clawing back money you already sent. Paying weekly creates more transaction fees than it is worth on small amounts, and paying quarterly is the fastest way to lose good affiliates to a competitor with a shorter cycle.
What is a typical affiliate commission rate for SaaS?
Most B2B SaaS programs land between 20% and 30% of first-year revenue, either as a recurring share for 12 months or a one-time payment on the first invoice. Recurring commissions attract better affiliates because the income compounds, but they raise your cost per customer permanently. Model both against your payback period before you publish a rate, because raising it later is much easier than cutting it.
Do affiliates need to be 1099 employees?
No, and the phrase mixes two things up. Affiliates are not employees at all. They are independent parties promoting your product under an affiliate agreement, and the 1099-NEC is simply the information return you file for non-employees you paid above the threshold. Filing one does not create an employment relationship, and it does not obligate you to withhold payroll tax.
Can you pay affiliates in a currency other than dollars?
Yes, and for international programs you generally should. Paying a European affiliate in dollars pushes the conversion cost and the exchange-rate risk onto them, which quietly reduces their effective commission. Wise and most platform-managed payout systems handle multi-currency transfers. Whatever the payment currency, your US reporting obligations are still calculated in dollars.
What most programs get wrong
The failure pattern is consistent and it is almost never the payment rail. Programs collect tax forms too late, publish no payout schedule so affiliates chase them by email, and pay out of a spreadsheet that disagrees with the billing system. Every one of those is an admin problem that compounds as the affiliate count grows.
Fix the sequence first. Form at signup, commission tracked automatically against billing, fixed monthly payout date after a holdback, records exported monthly. Once that is running, the interesting question stops being how you pay affiliates and becomes which affiliates are worth having, which is a recruiting problem rather than a finance one. Our guide to how to find affiliates covers that side, and affiliate tracking software is where the commission math itself lives.