How To Make Money With Amazon Associates (Amazon’s Affiliate Program)
How To Make Money With Amazon Associates
This blog post is for informational purposes only. I tried to make the content in this post as accurate as possible, but I cannot guarantee that this post is completely reliable or free of errors. If you don’t know what Affiliate Marketing is, I would check out my blog post called Overview of Affiliate Marketing.
Amazon is currently the worlds largest online retailer for consumer goods. Amazon was founded by Jeff Bezos (the CEO of Amazon) in Bellevue Washington in 1994. Amazon’s headquarters is located in Seattle Washington. Amazon’s originally started out as an online bookstore. Now, Amazon is the world’s largest online retailer that sells a vast variety of consumer goods. Asides from the United States, Amazon has online retail sites in 14 other countries around the world. Last year (2014) Amazon yielded an estimated $89 billion dollars in revenue.
How can you make money with Amazon: There are multiple ways of making money through Amazon This includes becoming a seller on Amazon through Amazon FBA or without Amazon FBA as well as Amazon Associates. Amazon’s Associates is Amazon’s Affiliate Program
Why should you use Amazon: In my opinion, using Amazon through Amazon FBA, Amazon Associates or as a seller is a good because they have the largest selection of consumer products out of any online retailer. As the world’s largest online retailer, Amazon has the most internet traffic for an online retailer. Using Amazon would be an ideal choice for maximizing your traffic as a seller, affiliate or through Amazon FBA.
What is Amazon Associates: Amazon Associates is the Amazon’s affiliate program. Amazon Associate’s was one of the first affiliate programs on the web and currently is one of the most trustworthy affiliate programs. As an affiliate for Amazon, you are not required to have a live website in order to become an affiliate. There are certain Affiliate Networks (such as Rakuten Linkshare) that require you to have a live website in order to become an Affiliate.
Amazon’s Commission Rates: As an Affiliate on Amazon, you can start off earning a 4% commission on every sale that you help make as an affiliate. The more sales you make, the higher your commission rate per sale. However, the commissions stay relatively small even though they slightly increase as you make more sales.
These are the commissions you could earn once you make enough sales.
1) 1 to 6 sales: 4% commission on each sale
2) 7 to 30 sales: 6% commission on each sale
3) 31 to 110 sales: 6.50% commission on each sale
4) 111 to 320 sales: 7% commission on each sale
5) 321 to 630 sales: 7.50% commission on each sale
6) 630 to 1570 sales: 8% commission on each sale
7) 1571 to 3130 sales: 8.25% commission on each sale
8) 3131 sales or more: 8.50% commission on each sale
As an affiliate for Amazon, you do not only have the potential to earn a commission for the specific product that you are promoting, but you can also earn a commission on products that you are not promoting. If somebody clicks on an Amazon affiliate link of yours, Amazon will play a 24-hour cookie on their computer. You are given a 24-hour window of time in which you can earn a commission from that individual. You can still earn a commission from them even if they decide not to purchase the product that you are promoting. As long as they purchase any product on Amazon within 24 hours of clicking on your affiliate link, you are able to earn a commission from them.
What is the earning potential with Amazon Associates: Even though the commission rate as an Amazon Affiliate starts out small and stays relatively small, you still have the potential to earn a lot of revenue through Amazon. Amazon is the largest, fastest growing and one of the most trustworthy online retailers. This means that you could attract a lot of potential visitors as an affiliate. Each commission with Amazon is small, but small commissions can add up to a lot of revenue. There are some affiliates on Amazon that earn around hundreds of dollars per month, while there are others that are earning tens of thousands of dollars per month. The amount you could potentially earn through Amazon depends on the form of marketing that your using and the amount of time you devote to using Amazon Associates.
Is there a Profitable Niche: Which Niche should I choose: There are certain niches that are more profitable than others. Currently, on Amazon, Consumer Electronics and Health are some of the most profitable niches on Amazon. Promoting products with a higher retail price will also lead to bigger commissions. However, promoting high ticket items on Amazon will not benefit you if those items do not convert very well. I personally think a product’s conversion rate is more important than its price. Even if you receive a small commission per sale, those commissions can add up to a lot of revenue if you are promoting a product that converts well.
One way of increasing your conversion rate for a product is by finding a product that revolves around your interests. Choosing a niche that revolves around your interest will make it easier for you to promote a product within the niche. Generally speaking, you are more knowledgeable in areas that are of interest to you. This means that you will have an easier time creating content for the products that you are promoting within your niche. Better content as an affiliate usually leads to a higher conversion rate.
Providing Amazon with Appropriate Tax Information
Tax ID Number: As an Amazon Affiliate, you are required to pay taxes on all of your affiliate earnings each year. In order to do this, you have to provide Amazon with a Tax ID Number. This can either be a Social Security Number (SSN) or an Employer Identification Number (EIN). I personally am not using my Social Security Number because I afraid of the possibility of Identity Theft. I ended up applying for an Employer Identification Number (EIN).
Employer Identification Number (EIN): An Employer Identification Number (EIN) is a number that the IRS (Internal Revenue Service) uses in order to identify a business entity. These numbers can be referred to as a (TIN) Tax Identification Number or as a (FEIN) Federal Employer Identification Number. The IRS requires you to get an EIN if you are part of a certain business entity. These can include LLCs (Limited Liability Companies), Single Member LLCs, Corporations, Partnerships and Sole Proprietorships. In case you are unsure, here are differences between each one.
Explanations of Different Business Structures
Limited Liability Company (LLC): The term Limited Liability means that any individual who has part ownership of a company is only financially liable for the money he or she have invested into the company. There are also no restrictions as to how many owners a Limited Liability Company can have. Unlike a Corporation, the owners of a Limited Liability Company are not shareholders (stockholders). Since LLC’s offer limited liability to each member who manages the company, members of an LLC are not eligible for tax advantages. Income cannot be evenly distributed among every member who manages the company.
Corporation: A corporation is a type of business entity that is owned by shareholders. However, shareholders that own the company are not liable for debts that the business incurs. Those who manage a Corporation such as a CFO (Chief Financial Officer) or CEO (Chief Executive Officer) are individuals that are liable for any actions or debts that the business incurs.
Partnership: A Partnership is a type of business entity that consists of two or more individuals. Revenue and expenses are equally divided among each member of the partnership.
Sole Proprietorship: A sole proprietorship is a business entity that is run by a single individual. Within a sole proprietorship, you are personally liable for all taxes and expenses that are incurred.
*If you less than 400 dollars per year as an independent contractor or as a Sole Proprietor for any given year, you are not considered self-employed by the IRS.*
Filing Taxes as an Amazon Associate
Amazon Associates Tax Form: As an Affiliate for Amazon, any income you earn is reported to the IRS as income earned as an Independent Contractor. As a result, Amazon requires a Social Security Number or an Employer Identification Number from you in order to file a 1099 MISC (Miscellaneous income) tax form to the IRS. This tax form reports the affiliate income you earned through Amazon for any given year. Amazon sends one copy to the IRS and sends another copy to you. Amazon will only file a 1099 MISC tax form to the IRS if you earn commissions that exceed a total of $600 for any given year. If you earn less than $600 in any given year, Amazon will not file a 1099 MISC tax form to the IRS. However, you are still required to record your affiliate income from Amazon as an independent contractor.
Reporting Affiliate Income (Miscellaneous Income) as an Employee:
If you are both an employee and an Amazon Affiliate, you will record the income reported on the 1099 MISC tax form in your annual tax return (W2 Tax Form) in a section called “other income”.
Reporting Affiliate Income (Miscellaneous Income) as a Self Employed Individual
Reporting Affiliate Income will be different if you are Self Employed.
The IRS considers you self-employed if you meet one of the following:
- Own a business or trade as a sole proprietor or as an independent contractor
- If you part of a business by being a member of a partnership.
- If you own a part-time business
Self Employment Tax and Income Tax
Self Employment Tax (SE Tax): Any income you earn through self-employment is also susceptible to an SE Tax which includes Social Security and Medicare Taxes. In order to figure out the amount of money you owe in Social Security and Medicare Taxes, you need to use the 1040 ES (Estimates) Tax Form. This form is used in order to figure out your Social Security and Medicare Tax Estimates from Self Employment. Calculating the amount of income that is subject to a Self Employment Tax can be calculated with a Schedule SE 1040 Tax Form.
Income Tax: Any income that is subject to an income tax is taxable income. As an independent contractor for Amazon (Amazon associate), your income from Amazon can be subject to an income tax. Here are a few tax formulas:
Calculating Adjusted Gross Income:
Adjusted Gross Income = (Gross Income) minus (Expenditure Deductions)
Calculating Taxable Income using Adjusted Gross Income:
Taxable Income = (Adjusted Gross Income) minus (Taxable Income Deductions)
Calculating Taxable Income using Gross Income:
Taxable Income = (Gross Income) minus (Taxable Income Deductions)
Calculating Gross Profit:
Gross Profit = (Total Income) – (Total Expenses)
*Gross Income = Total Income*
Deductions: These are costs (expenditures) that can be subtracted from your Gross Income (Total Income), Adjusted Gross Income and Taxable Income. Deductions are also called Adjustments.
Schedule C 1040 Tax Form and Form 1040 Tax Form: As a self-employed individual, any business expenditure and taxable income deductions that you claim will be used in calculating your AGI (Adjusted Gross Income) and (Taxable Income). Taxable Income is reported on Form 1040 while Adjusted Gross Income is calculated using a Schedule C Tax Form and is reported on the Form 1040 Tax Form.
Gross Income and Adjusted Gross Income Cost Deductions
Business Expenditure (Cost) Deductions: Unlike Employees, Self Employed individuals have the option of using their net earnings (Income minus Expenses) to claim expenditure deductions. If you are a running a profitable business as a Sole Proprietor or as an Independent Contractor, you can use those net earnings to deduct business expenses. For Business Expenditures, some of the different types of expenditures that are deductible include:
- Cost of goods sold – This includes input costs for raw materials that are used to produce goods. Wage Expenses for hiring workers are also deductible.
- Capital costs – The cost of facilities and machinery that are used for the production of goods from raw materials
- Personal Expenses – Personal Expenses can be deducted under certain situations. If you borrowed money for both business related and non-business related purposes, then you can deduct the portion of money that you used for business expenses.
Taxable Income Cost Deductions
Standard Deduction: This is a deduction on taxable income that depends on your filing status when you file your taxes. This includes whether or not you are single, married or if you file taxes jointly with another individual. For married couples that file taxes jointly, the standard deduction is higher than married couples that don’t file taxes jointly. The Standard Deduction is usually twice as high. For individuals who are single, The deduction is less than the deduction for married couples who file taxes jointly or separately. There are certain situations where people are not eligible for a standard deduction.
a) Married couples that file taxes jointly with a spouse that itemizes on his or her tax return.
b) Non-Resident and Dual Status Aliens. Dual Status Aliens are individuals who are both non-resident aliens and resident aliens in a given year. However, a non-resident alien that is married to a U.S. resident is eligible for a standard deduction.
c) You have a change in your accounting period and file a tax return for a short tax year.
Itemized Deductions: Most taxpayers are offered the option of choosing between a Standard Deduction or an Itemized Deduction on taxable income. However, not all taxpayers are offered an Itemized Deduction on taxable income. Itemized Deductions are only eligible for taxpayers that qualify for standard deductions. Most taxpayers usually choose the deduction that is greater. This usually happens to be an Itemized Deduction. Itemized Deductions are a list of expenditures that taxpayers can choose to use as tax deductions. In the U.S., U.S. Citizens and U.S. Aliens are both eligible for Itemized Deductions.
Criteria for U.S. Citizens and U.S. Aliens
A person born in the United States.
A person whose parent is a U.S. citizen.
An alien who has been naturalized and is now a U.S. citizen
A person born in Puerto Rico.
A person born in Guam.
A person born in the U.S. Virgin Islands.
An Alien, for any particular country, is an individual that is legally able to stay in the country without citizenship. Within the U.S., an Alien is anybody who is not a U.S. Citizen or U.S. National that is legally able to stay in the U.S.
U.S. Resident Alien:
Within the U.S., a Resident Alien is any non-U.S. Citizen or National that is a temporary U.S. Resident.
U.S. Non-Resident Alien:
A Non-Resident Alien refers to any non-U.S. citizen or National that is legally able to visit the U.S. for business, travel, education, etc..
Filing Taxes as a Non-Resident Alien:
For Tax Related Purposes, U.S. Resident Aliens are treated like U.S. Citizens. Non-Resident Aliens are treated differently. As a Non Resident Alien within the U.S., paying taxes on income earned only in the U.S. depends on whether or not your country’s government allows you to become exempt from paying taxes on income earned in the U.S. If you are paying taxes on income earned in the U.S. as a Non Resident Alien, the forms that you have to use for filing annual tax returns include Form 1040NR (Non Resident Alien With Dependents) and Form 1040 NR EZ (Non Resident Alien without Dependents).
As a Non-Resident Alien that is married to a Resident Alien, you can also be eligible for filing status as a Resident alien and can file taxes jointly with your husband or wife.
States that are Eligible for Amazon Associates and Getting Paid
States that are not Eligible for Amazon’s Associate’s program: Although most states in the U.S. have state tax laws that comply with Amazon’s Affiliate program, there are certain states within the United States where you are not allowed to use Amazon’s Associate’s program. These states include Colorado, Arkansas, Missouri, Rhode Island and Maine.
Getting Paid as an Amazon Associate: As an Amazon Associate, you are paid 60 days after any sales are made as an affiliate. This means that any commissions that you earn as an associate will not be received until 2 months after the date in which the sales were made for those commissions.
Getting Started with Amazon Associates
Create a website: Before you can create an account as an Amazon Associate, you need to have a website. In order to create a website, you first need to obtain a domain and find a web hosting service that you can host your website on.
Finding A Domain: A Domain is the URL of your website that contains the name of your website. I got my domain from this particular website at NameCheap (www.namecheap.com). This is only one option. GoDaddy (www.godaddy.com) is another option that you can use for finding a domain for your website. At NameCheap, the cost of purchasing a domain for a year is around $11 per year. The cost of purchasing a domain at GoDaddy is pretty similar and is about $ 10 per year.
Web Hosting Service: Once you get your domain, you need to find a web hosting service that you can host your website on. Bluehost (www.bluehost.com) has been a popular option for web hosting. The cost of hosting a WordPress Website on Bluehost per month is about $20.00 per month. These are the different Web Hosting plans that Blue Host offers to customers:
1. Shared Hosting:
a) Basic ($3.95/Month): 1 website, 50 Gigabytes of Website Space, Unmetered Bandwidth, 1 included Domain, 5 parked domains, 25 subdomains, 5 email accounts (100 Megabytes of Email storage per account)
b) Plus ($5.95/Month): Unlimited websites, Unmetered webspace, Unmetered Bandwidth, 1 included domain, Unlimited Parked Domains, Unlimited Shared Domains, Unlimited Email Accounts (Unlimited Email Storage per account). Extras ($24/Year) include 1 Spam Expert. Marketing Offer ($200 included)
c) Prime ($5.95/Month): Unlimited websites, Unmetered webspace, Unmetered Bandwidth, 1 included domain, Unlimited Parked Domains, Unlimited Shared Domains, Unlimited Email Accounts (Unlimited Email Storage per account). Extras ($80/Year) include 1 Spam Expert, 1 Domain Privacy, SiteBackup Pro. (Marketing Offer ($200 included)
2. Cloud Hosting:
a) Starter ($6.95/Month): 1 Website, 100 Gigabytes storage space, Unmetered Bandwidth, 1 Free Domain, 2 Gigabytes of Available Memory (RAM), 2 Available CPUs, Marketing Offer ($50), 100 Email Accounts, 500 Megabytes of Email Storage, Local Catching, 1 Click Resource Scaling
b) Performance ($8.95/Month): Unlimited Websites, Unmetered Storage Space, Unmetered Bandwidth, 1 Free Domain, 4 Gigabytes of Available Memory (RAM), 4 Available CPUs, Marketing Offer ($200), Unlimited Email Accounts, Unlimited Email Storage, Local Catching, 1 Click Resource Scaling, 1 Spam Expert
c) Business Pro ($15.95/Month): Unlimited Websites, Unmetered Storage Space, Unmetered Bandwidth, 1 Free Domain, 6 Gigabytes of Available Memory (RAM), 6 Available CPUs, Marketing Offer ($200), Unlimited Email Accounts, Unlimited Email Storage, Local Catching, 1 Click Resource Scaling, 2 Spam Experts, 1 Dedicated IP Address, 1 SSL Certificate, Domain Privacy, SiteBackup + Restore
3. WordPress Hosting
a) WP Standard ($19.99/Month): 100 Million Visits/month, 30 Gigabytes for Storage, 30 Gigabytes for Backup, 2 Gigabytes of Available Memory (RAM), 1 Included Domain, 1 IP Address, Money Back Guarantee, 24/7 Support, Enhanced C-Panel, SiteLock CDN, SiteLock Pro
b) WP Enhanced ($29.99/Month): 300 Million Visits/month, 60 Gigabytes of Storage, 60 Gigabytes for Backup, 4 Gigabytes for Available Memory, 1 included Domain, 1 IP Address, Money Back Guarantee, 24/7 Support, Enhanced C-Panel, SiteLock CDN/WAF Pro, SiteLock Pro
c) WP Premium ($39.99/Month): 600 Million Visits/month, 120 Gigabytes of Storage, 120 Gigabytes for Backup, 6 Gigabytes of Available Memory (RAM), 1 Included Domain, 1 IP Address, Money Back Guarantee, 24/7 Support, Enhanced C-Panel, SiteLock CDN/WAF Pro, SiteLock Premium, Positive SSL Certificate
d) WP Ultimate ($49.99/Month): Unlimited Visits/month, 240 Gigabytes of Storage, 240 Gigabytes of Backup, 8 Gigabytes of Available Memory (RAM), 1 Included Domain, 1 IP Address, Money Back Guarantee, 24/7 Support, Enhanced C-Panel, SiteLock CDN/WAF Pro, SiteLock Enterprise, Positive WildCard SSL Certificate
4. WooCommerce Hosting:
a) Starter ($12.95/Month): WooCommerce Installed, Positive SSL Certificate, Dedicated Support Line, 100 Gigabytes of Webspace, Unmetered Bandwidth, 1 Dedicated IP Address, 1 Included Domain, 1 Parked Domain, 5 SubDomains, 5 Email Accounts, 100 Megabytes of Email Storage per Account, $100 Marketing Offer
b) Plus ($15.95/Month): WooCommerce Installed, Positive SSL Certificate, Dedicated Support Line, Unmetered Website Space, Unmetered Bandwidth, 1 Dedicated IP Address, 1 Included Domain, Unlimited Parked Domains, Unlimited SubDomains, Unlimited Email Accounts, Unlimited Email Storage, Marketing Offer ($150 per year), Over $24/per year in Extras (1 Spam Expert)
c) Pro ($23.95/Month): WooCommerce Installed, Comodo SSL Certificate, Dedicated Support Line, Unmetered Website Space, Unmetered Bandwidth, 1 Dedicated IP Address, 1 Included Domain, Unlimited Parked Domains, Unlimited SubDomains, Unlimited Email Accounts, Unlimited Email Storage, Marketing Offer ($300 per year), Over $80/per year in Extras (2 Spam Experts, SiteBackup Pro, 1 Domain Privacy
5. VPS (Virtual Private Server) Hosting:
a) Standard (14.99/Month): 2 CPU Cores, 30 Gigabytes of SAN Storage, 2 Gigabytes of RAM, 1 Terabyte of Bandwidth, 1 included Domain, 1 IP Address, Money-Back Guarantee, 24/7 Support
b) Enhanced ($29.99/Month): 2 CPU Cores, 60 Gigabytes of SAN Storage, 4 Gigabytes of RAM, 2 Terabytes of Bandwidth, 1 included Domain, 2 IP Addresses, Money Back Guarantee, 24/7 Support
c) Premium ($44.99/Month): 3 CPU Cores, 120 Gigabytes of SAN Storage, 6 Gigabytes of RAM, 3 Terabytes of Bandwidth, 1 Included Domain, 2 IP Addresses, Money Back Guarantee, 24/7 Support
d) Ultimate (59.99/Month): 4 CPU Cores, 240 Gigabytes of SAN Storage, 8 Gigabytes of RAM, 4 Terabytes of Bandwidth, 1 Included Domain, 2 IP Addresses, Money Back Guarantee, 24/7 Support
6. Dedicated Hosting:
a) Standard ($79.99/Month): 4 Cores and 8 Threads, 1 Terabyte (Mirrored) of Storage, 4 Gigabytes of RAM, 5 Terabytes of Bandwidth, 1 Included Domain, 3 IP Addresses, Money Back Guarantee, 24/7 Support
b) Enhanced ($99.99/Month): 4 Cores and 8 Threads, 1 Terabyte (Mirrored) of Storage, 8 Gigabytes of RAM, 10 Terabytes of Bandwidth, 1 Included Domain, 4 IP Addresses, Money Back Guarantee, 24/7 Support
c) Premium ($119/Month): 4 Cores and 8 Threads, 1 Terabyte (Mirrored) of Storage, 16 Gigabytes of RAM, 15 Terabytes of Bandwidth, 1 Included Domain, 5 IP Addresses, Money Back Guarantee, 24/7 Support
Wealthy Affiliate: I wrote a review of Wealthy Affiliate in a separate blog post. Wealthy Affiliate is another option for Web Hosting. Wealthy Affiliate offers an abundance of educational videos and courses that are great for new and experienced Internet Marketers. Wealthy Affiliate’s Site Rubix website builder make the process of creating a website much more efficient. Site Rubix comes with Site Analytics which helps you gain insights into your website’s strengths and weaknesses. Their websites are also hosted on a Web Hosting platform that is very secure. Some of the features that come with hosting websites at Wealthy Affiliate as a premium member include:
- Cloud Hosting (Increases Website Performance)
- Full Redundancy (two instances of your website run at the same time)
- Daily Backups
- Site Analytics
- 24/7 Support
- Hosting as many websites as you want
- Easy to Setup (Takes a couple of minutes at the most)
- Large amount of Disk Space
- High Bandwidth support
Although the memberships at Wealthy Affiliate are not cheap, the value you are getting in return for what you are paying makes Wealthy Affiliate a good option. However, Wealthy Affiliate will only be of value to you if you are committed to using Wealthy Affiliate consistently. If you use Wealthy Affiliate everyday or frequently throughout the week, you will definitely get your money’s worth.
I hope you found this information helpful. Feel free to leave any questions or comments in the comment box below. Please let me know if there is something you would have liked to have seen in this post or in a separate post.
1) “Self-Employed Individuals Tax Center.” IRS.gov. IRS. Web. 19 Feb. 2016.<https://www.irs.gov/Individuals/Self-Employed>.
2) Amazon.com Associates:”The Web’s Most Popular and Successful Affiliate Program – Compensation Overview.” Amazon.com. Amazon. Web. 19 Feb. 2016. <https://affiliate-program.amazon.com/gp/associates/join/compensation.html>.
3)”Online Tools & Updates Nonresident Aliens.” IRS.gov. IRS. Web. 19 Feb. 2016. <https://www.irs.gov/Individuals/International-Taxpayers/Nonresident-Aliens>.
4) “Amazon.com Associates Central – Help.” Amazon.com. Amazon. Web. 19 Feb. 2016. <https://affiliate-program.amazon.com/gp/associates/help/t64/a4?ie=UTF8>.
5) “Deducting Business Expenses.” IRS.gov. IRS. Web. 19 Feb. 2016.<https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deducting-Business-Expenses>.
6) “How to Calculate Self-Employment Tax.” Oblivious Investor. Oblivious Investor. Web. 20 Feb. 2016. <http://www.obliviousinvestor.com/how-to-calculate-self-employment-tax/>.
7) “Standard Deduction.” IRS. IRS, n.d. Web. 20 Feb. 2016. https://www.irs.gov/publications/p17/ch20.html