In Early 2008 the IRS conducted a random audit on Mike Filsaime’s company.  There was nothing Mike did to trigger the audit,  well other then being in our industry and the crazy spikes we see in revenue setting off some “Red Flags”.  Anyway…  They went over all of his financial records going back 7 years  and came back to him with a huge mountain of paper work asking where his 1099’s were on all these people he had paid money to.

Mike told me for years he had been paying money to affiliates via PayPal and figured that was good enough records to keep on them.  He had no clue he needed to also get a 1099 on every person he was paying money to through PayPal.  After all… PayPal has records on these guys right?

The IRS told him it did not matter what PayPal had.  It was HIS responsibility to have the 1099 tax forms on file for each of these people he was paying money out to.  OUCH.

Mike said they not only let him NOT deduct those expenses but now HE now had to claim that income on that money that was actually paid out to people.

But here is where it really sucked…. bad…

Since some of the people Mike paid were way back in the early 2000’s… and he now had to claim that as income….  Guess what?  That’s right he had to pay the taxes PLUS a fine for each infraction AND interest on that money FOR THE LAST 7 YEARS.

Now the actual money paid out to affiliates that he did not have 1099’s on only totaled a couple hundred thousand dollars but Mike had to write a check to the IRS for back payments, fines, and interest for over 1.5 MILLION dollars….  ZOMG!!!!!!!!!

So what did Mike do wrong?  He always paid all his taxes and took proper deductions.   He just did not have good paper work and that cost him 1.5 million dollars of his hard earned profits.

Mike told me over a year later he still thinks about it at least once a day what he could have done with that money.  Help family and friends…  Build a school for children in a 3rd world country…. geez…

But like most bad ass serial entrepreneurs Mike figured out how to turn his experience into an incredible positive.

He created a service that completely prevent people from ever ending up in his shoes.  Honestly I can’t believe someone has not thought of this yet.

The website is called Pay People Online and its pretty hot.  Right now its 100% free to use.

The way it works is you upload your payment file to it… then if it does not have someones electronically filed 1099 on record it emails them and tells them they need to complete it in order to get paid.  Once this is done it lets you know. 

For users who use PayPal Mass Payment files (like 99% of us) its even easier.  You just upload your mass pay file to it,  it then checks to see if it has 1099’s on file and if not emails people and lets them know they need to fill it out to get paid, then spits you back out a payment file for people you DO have 1099’s on.

Slick eh?  I really like this site and I think its going to turn out to be worth MUCH more then the 1.5 Million that it cost Mike to have an epiphany about this much needed service.

I say it all the time adversity is opportunity and this is a classic example of just that.

ShoeMoney

Google said Tuesday that Stephanie Tilenius would join the Internet giant as vice president of commerce, a new position.

The EBay veteran said in September she would leave the Silicon Valley auction site. Google has tried to create a rival to PayPal, EBay’s online payment service.

In addition to Google Checkout, Google has made some subtle moves into online commerce, such as showcasing shopping results for items such as “women’s white blouses” on its search pages.

Tilenius, co-founder of PlanetRx.com, made a name for herself at EBay after arriving in 2001, running a number of divisions and holding a variety of executive roles.

A Google spokeswoman said Tilenius would not be available for an interview Tuesday. A person close to the situation said: “Stephanie will be leading our efforts to develop digital content and commerce in the cloud and will be our point person for everything commerce related — including product search and payments — an area where we see tremendous opportunity for growth.”

In the nonexclusive deal, advertisers will also be able to use PayPal, a unit of eBay Inc (EBAY.O), to purchase ads on Facebook, which derives the bulk of its revenue from such advertising.

Facebook allows users to send virtual gift items — such as cupcakes, airplanes and Teddy-bears that don’t exist in the real world — to friends using a virtual currency system, which is essentially fake money. Users currently pay for these items using a credit card but now will be able to use PayPal as well.

Privately held Facebook does not disclose how much revenue it draws from virtual goods, a fast-growing digital add-on that has emerged as much more than just a fad.

BGC Partners analyst Colin Gillis, who called the deal a “nice win” for PayPal, estimates that digital goods on Facebook could be as much as a $100 million business.

“That’s big business. You know what the margin is on that virtual cupcake?” said Gillis.

PayPal’s vice president of platform and emerging technology, Osama Bedier, said the global market for digital goods is worth between $3 billion to $6 billion and growing at least 50 percent annually.

“We’re going to invest behind this (virtual goods) in a pretty big way in 2010. It’s small today but it’s growing extremely fast and we think it will matter in the next two or three years in a big way,” Bedier said.

But Gillis said the partnership appeared odd for Facebook, given widespread speculation that the company was developing its own payments system.

Dan Levy, Facebook’s director of payment operations, said the company’s focus was on building a virtual currency to make it easier for users and developers to build a virtual goods business on the site.

“You really know how to live, Nancy.”

While that’s a wonderful compliment in any context, what particularly rang my bell was what it told me about the effectiveness of my own style of social networking. Since I am my brand, the idea that someone might see my well-rounded life as a reason to hire me or recommend me as a life coach is very appealing.

At least once a week I am asked by a friend or acquaintance, especially entrepreneurial sorts, what I like or find effective about social networking. I tell them what you rarely read in articles with tips on how to use sites like Facebook and LinkedIn to further your business: Develop a style in this arena that is uniquely yours.

For example, I tend to post status updates on Facebook once or twice a day. This is, for the record, a commitment of approximately 15 minutes a day because I like to scan what others have to say. I have never done a quiz or game on there because those don’t interest me. What I like is reading witty, informative or off-the-wall comments from people I have friend-ed. Among the daily ramblings – and this is key – I enjoy finding out where their band is playing next, what they’ve written lately or what gallery is showing their art. I like hearing what they think of Super Bowl ads, the Olympics and even what’s happening on Grey’s Anatomy.

I know this is not applicable to all, but for me it’s essential to mix business and pleasure to be effective on a site like Facebook because my work — writing and life coaching — requires that I live well and open myself to possibility. Because I post my Game Plan columns twice a week, my readership has grown; it gives my friends the option of reading them or passing on them depending on level of interest in the topic or how much time they have in the moment. However, I can’t stress enough that this is effective because those are not the only things I post. When people join and instantly start promoting themselves and only promoting themselves, they stick out like a sore thumb.

Think of it like this – for lots of people, Facebook is like a gathering at your house while LinkedIn is more of a business networking event. Keeping that in mind, what topics would be appropriate in those contexts? Would you walk into a party at your friend’s home and say, “Hi, my name is Joe and I would love to sell your home for you” as you greet other guests? Hello! Of course not. So why do it on Facebook?

Now, that said, I am certain there are people who have “hidden” my posts from their daily feed because they would prefer more of a business-centric vibe. That’s their style, the one they’ve cultivated that fulfills their needs. They don’t care if I went to see Up in the Air last night. That’s part of this, too. It’s important to find what works for you and stick with it because it’s genuine. Genuine is always a better bet, isn’t it?

I tend to gravitate to people who are real, the ones who are upbeat some days and sarcastic on others. The perpetually positive or pessimistic turn me off on every level. I wouldn’t hire a non-stop cheery person or one who never sees the good in life. How they post on Facebook and Twitter gives an excellent gauge of overall demeanor.

For a whole generation of folks growing up on the possibilities that social networking presents, this is a natural extension of how they are in the world. For those of us who grew up before there was an Internet – hard to believe I was a journalist for about a dozen years without it – this is a fantastic new world where we can choose to expand our community, family and professional life. My bank teller, my hair stylist and even the guy who owns a great framing business in my town are in my network.

In over a year on Twitter, Facebook and LinkedIn, I have had client referrals, done a home exchange with a friend in Italy, lent neighbors a portable heater when their boiler shut down, generated column ideas, connected with my history by adding former classmates after my high school reunion, and joined friends who were brunching in a nearby restaurant. Among my friends, there are a few who landed jobs and one who reconnected with a long-lost exchange student that had stayed at her home.

Sitting on a broken down New Jersey Transit train one evening with no light, Facebook provided a welcome feeling of community in that two hours of blackness. The bonus is I didn’t annoy everyone around me by talking on the phone. The next time I have a hankering for a good dessert on the fly in New York, I can simply check Twitter and see where the Dessert Truck is parked; they were featured on Throwdown with Bobby Flay and were smart enough to hook in viewers by posting their locale each day. In other words, they have a style.

And while cultivating your style is mostly about content, don’t forget that frequency is a part of it. I recall interviewing Lisa Maloney Vinton about her Internet radio show, Only2Degrees, last year and she put it best to a gentleman who didn’t like Facebook because he had essentially created a page and then abandoned it. She likened it to joining the Chamber of Commerce and then not going to networking events.

“You have to show up,” she told him with a laugh.

She, of course, has been an active Facebook friend of mine ever since. I’m even friends with Barbie, for goodness sake.

I really do know how to live.

Lots of businesses are on Facebook and Twitter, but now the researchers at Rice University have figured just how effective the sites are and why they are good consumers, too.

You may remember Dessert Gallery from their cake giveaway last year to anyone named Jennifer. Danielle Hunter knows the bakery from Facebook.

“I was playing around on the Facebook board and saw Dessert Gallery and saw fan pages in your area,” said Facebook user Danielle Hunter. “And I was like ‘Oh yes! Definite fan.’”

While plenty of businesses are on Facebook and Twitter, no one really knew just how powerful the web sites could be as tools for attracting customers until now. An associate professor from Rice University surveyed 1,700 customers of Dessert Gallery over a three month period and found Facebook fans were good for business.

The stores Facebook fans made 36 percent more visits to the restaurant each month than non Facebook customers and they spent 45 percent more of their dining out budget at the bakery. Those fans also spent 33 percent more at Dessert Gallery than other restaurants and had greater emotional attachment to the brand.

Store owner Sara Brook says the sites have changed the way she reaches out to consumers.

“It used to be, back in the old days, I was able to communicate with customer once a year,” she said.

Now Brook has near instant access to thousands of customers and there is something in it for consumers who’ve signed up as fans.

“It is amazing what people will do for a free cookie or a brownie, you know. If we have a survey or trying to get people’s opinions, they are very happy to give it,” said Brook.

The researchers also found social media should not be the only marketing a company does, but when done right, social networking sites it can be money makers.

It also lets business owners respond quickly to a problem. I’ve heard from a lot of people who used a company’s Facebook and Twitter account to complain about a bad experience and they ended up getting a resolution.

If you have been in business for any amount of time at all, be it freelancing or running a larger operation, sooner or later you are bound to experience a deadbeat client and find the need to initiate the debt collection process.

Debt collection can be a tricky situation. If we send Louie with a baseball bat down to break their knuckles, in this litigious day and age, the deadbeat will just turn around and sue us for everything we have. Then again, we are not in business to just give away the store and on a personal level, cannot allow ourselves to be played for chumps.

Therefore, this article is dedicated to the art of the collection letter. May you never have to write one, but then if you never have to, it probably means you’re not doing much business in the first place, in which case you have bigger problems at hand.

The Art of the Collection Letter

OK, first off, this is a bit misleading because unfortunately when it comes to collecting from a deadbeat client, one collection letter does not usually do it, so this might be titled more appropriately – “The Art of the Debt Collection Letter Series.”

In this series of letters, each one will most always turn more serious in tone than the last while always maintaining an air of professionalism. (In other words, don’t let a deadbeat turn you into stress case! Keep it together!).

Please note: With each collection notice listed below, it is usually best to follow up with a phone call to make sure you are doing everything possible on your end to communicate with your client.

The First Notice:

The first notice you send to a client for collection of a past-due payment is usually an email and should always read more like a friendly, light communication simply reminding them that you are hoping to receive payment soon and to please make their account current. This notice should be sent usually no more than a couple of weeks after the payment is deemed late. The longer you allow a debt to go uncollected, the less chance there will be of collecting.

The Second Notice:

If after a week, you have not received a response from the first notice, send another and word it a bit more urgently while stating that you value their business and are concerned about not being able to contact them and hope everything is alright with them.

The Third Notice:

If still no response, in the third week, send a printed letter via the mail (yes, the postal service still exists in some places) outlining the terms of your original agreement with the client and that not having their payment is affecting your ability to run your own business and to please contact you right away to arrange a payment plan. Some people tend to take a letter on paper more seriously than an email.

Final Notice:

In this fourth and final attempt, you should state clearly that this is their final notice before you refer their outstanding balance to collections. Be sure to include the terms of your original agreement once again in this letter and ask them to contact you right away to prevent their account from going into collections.

Referring An Outstanding Balance To A Collection Agency:

There are collection agencies that specialize in servicing the needs of small business clients. These agencies actually purchase the outstanding debt from you, not at face value of course, but sometimes for as little as $20 below face value of the debt and then they own that debt (meaning legally that the client no longer owes you, they owe the collection agency who purchased your claim against the client). They make their money by going after your deadbeat clients and keeping whatever they collect.

Let the professional debt collectors do what they do best while you do what you do best, which is running your respective businesses in which you specialize. After all, that is why YOUR clients came to YOU in the first place isn’t it? NOW GET BACK TO WORK!

Please visit my main website at http://www.letsgetahead.com for more great articles like this and share your thoughts there!

The changes, which will take effect March 30, will affect nearly every transaction on eBay’s marketplace.

“Insertion fees” — the price users pay to put an item up for auction on eBay — will drop as low as zero, while the “final value fee” assessed on successfully sold goods will rise to a flat 9% for all transactions, with a new per-item cap of $50. Currently, final fees vary by selling price, maxing out at 8.75% for items that sell for less than $25 but without any cap on the back end.

EBay (EBAY, Fortune 500) is also adjusting fees for fixed-price item sales, a category that has grown rapidly in the past two years. Listing costs will plunge to as low as 3 cents per item for the most active, high-volume sellers, but rise slightly for merchants who sell sporadically. Fixed-price listings will also become more visible on the site, showing up in eBay’s main search instead of being divided out into a separate set of results, as they are now.

EBay fee changes often set off firestorms within its seller community. This time, reaction was relatively upbeat.

“A lot of merchants on a lot of different levels are already calculating their savings and are liking the changes,” said Joseph Cortese, founder of the Professional eBay Sellers Alliance, an industry trade group. “I would say eBay struck an overall positive note today.”

At AuctionBytes.com, a gathering spot for online merchants, hundreds of eBay sellers quickly weighed in on the changes.

“I can’t believe I am saying this, but at first glance, I like the store changes,” one respondent wrote.

But others were annoyed at how smaller sellers could see their costs rise. “Why doesn’t eBay just say that they are not interested in small business sellers and be done with it?” another seller griped.

“This is why I have left eBay,” one merchant posted. “The pricing structure keeps changing like lines in the sand because eBay can’t figure out what kind of venue they want to be.”

EBay’s new fee structure mimics one it has already adopted internationally. In a conference call last week to discuss the company’s quarterly financial results, CEO John Donahoe telegraphed the upcoming changes.

“In Europe, we have successfully transformed our seller value proposition and business model over the past 18 months,” Donahoe said. “By offering lower insertion fees to our sellers, we have almost doubled the number of live listings, a significant increase in selection. We plan to adopt similar best practices in the U.S. in early 2010.”

JPMorgan Chase analyst Imran Khan expects the changes to boost eBay’s sales volume, as it did overseas. “For large PowerSellers who list hundreds or thousands of items monthly, the new scheme could bring significant savings on upfront costs,” he wrote in a research note. “We think the new structure could put some pressure on the middle of the curve: sellers who sell regularly but not in enough volume for the discounts to kick in.”

For example, a $200 electronics sale with a 99-cent starting price would currently rack up fees of $8.47. Under the new model, fees would rise to $18. But if the item didn’t sell, eBay would collect nothing.

After years of frustration, Pat Jackson finally found affordable technology to let her mobile repair technicians bill customer’s credit cards.

For years, small business owner Pat Jackson struggled to find an affordable way to let customers pay for heating and air conditioning repairs with their credit cards at home.

The owner of Jackson Comfort Systems in Northfield, Ohio, once tried out a credit card processing service from Nextel, but her technicians hated the bulky phones it required. Then she looked into options from AirCharge and United Bank Card, but those services were pricey: up to $250 for portable credit card machines and $25 per month, per truck for wireless service.

Eventually, she asked her 27 technicians to simply write down customer credit card numbers. Payments would get processed in her office. But that led to errors and higher credit card fees. Plus, customers didn’t like it.

“It was frustrating,” says Jackson. “We pride ourselves on good customer service, and that meant we weren’t giving it.”

But in May, Jackson received a flyer telling her about a new service called GoPayment from Intuit (INTU). For $20 per month, Jackson’s technicians can use their existing cell phones and text messaging services to process payments. Instead of waiting weeks to get paid, Jackson Comfort Systems gets its money on the spot.

Paying with plastic has been the norm for years, but for many small businesses like Jackson’s that operate remotely, it has been an elusive benefit. Out on the road, options were limited: buy cumbersome machines for hundreds of dollars, call the office with credit card numbers, or simply miss a sale by refusing to take credit cards.

Now, photographers, contractors, limo drivers and dog trainers — any business that operates remotely — can find a wealth of new software to process credit cards on mobile phones.

Apple’s (AAPL, Fortune 500) iPhone has been a big driver, with a slew of new applications popping up in the last year. Users type a credit card number and expiration date into the phone, and have the customer “sign” on the phone’s screen.

“Now we have some small businesses that are running their whole businesses off the iPhone,” says Derek Del Conte, co-founder of Inner Fence, which developed the first iPhone application for processing credit cards.

Inner Fence’s app costs 99 cents to download and then $25 a month. Each transaction costs 25 cents, plus 2.09% to 3.79% for fees charged by the credit card companies. The app also lets business owners issue refunds, review prior sales and email PDF receipts of their transactions.

GoPayment, the service that Jackson uses, requires a $60 setup fee and a $20 monthly fee, plus a $0.23 per-transaction fee and 1.64% to 3.54% for credit card processing fees.

Jackson decided to spend an extra $1,000 extra to buy 10 pocket-sized Bluetooth credit card swipers that work in conjunction with the cell phones. She reserves them for when she rings up bigger sales. Using a swiper lowers the credit card fees — it’s an anti-fraud measure adopted by the processing companies.

Jackson estimates that the swipers save her $600 a month in fees. For her company, which has annual sales of $3.2 million, the entire investment in mobile credit card processing paid off within a couple of months.

“It saves us a bunch of money at a time when business costs are increasing,” she says. “The customers like it, and the technicians like it — and they never like any kind of changes.”

Making money online used to pretty much require you to have your own Web site, products to sell and some marketing savvy. But a new generation of dot-coms have arisen that will pay you for what you know and who you know without you having to be a web designer or a marketing genius.

But it’s hard to tell hype from the real deal. I did a search on “make money online” and “making money online”, and much of the information out there is just promoting various infoproducts, mostly about Internet marketing. I see why people sometimes ask, “Is anyone making money online besides Internet marketing experts?”

So I put together a list of business opportunities with legitimate companies that:

• Pay cash, not just points towards rewards or a chance to win money
• Don’t require you to have your own Web domain or your own products
• Don’t involve any hard-selling
• Aren’t just promoting more Internet marketing
• Give a good return on your time investment

In the interest of objectivity, none of the links below are affiliate links, and none of them have paid or provided any other consideration for their presence here. These are legitimate companies with business models that allow you to get paid for a wide range of activities.

Help friends find better jobs.

Sites like ReferEarns, Zyoin, Who Do You Know For Dough?, Bohire and WiseStepp connect employers with prospective employees, many of whom are already employed and not actively job-hunting, via networking – the people who know these qualified candidates. Rewards for referring a candidate who gets hired range from $50 on up to several thousand dollars – not chump change. If you know a lot of job-seekers (and who doesn’t these days?), this is a great way to break into the recruiting business with no overhead.

Connect suppliers with buyers.

Referral fees are a common practice in business, but they haven’t been used much in online networking sites because there was no way to track them. Sites like Salesconx, InnerSell and uRefer now provide that. Vendors set the referral fees they’re willing to pay (and for what), and when the transaction happens, you get paid. uRefer also allows merchants to set up referral programs for introductions and meetings, as well as transactions.

Write.

A growing number of sites will pay for your articles or blog posts. Associated Content and Helium will “pay for performance” based on page views for just about anything you want to write about. Articles on specific topics they’re looking for can earn direct payments up to about $200. The rates are probably low for established writers, but if you’re trying to break into the field and have time on your hands, they’re a great way to start. Also, a lot of companies are looking for part-time bloggers. They may pay per post or on a steady contract. Our Weblogs Guide posts blogging jobs weekly in the forum.

Start your own blog.

You don’t have to have your own Web site, or install blogging software, or even figure out how to set up the advertising. At Blogger you can set up a blog for free in less than five minutes without knowing a thing about web design, and Blogger even automates setting up Google AdSense so you can make money off your blog by displaying ads and getting paid when people click on the ads. To make even more money from it, set up an affiliate program (see below) for books, music, etc., and insert your affiliate links whenever you refer to those items. You’ll have to get a lot of traffic to become a six-figure blogger, but pick an interesting topic, write well, tell all your friends, and you’re off to a good start.

Related: Monetizing Your Blog

Create topical resource hubs.

Are you an expert on a particular niche topic? Can you put together an overview of the topic and assemble some of the best resources on the topic from around the web? Then you can create topical hubs and get paid through sites like Squidoo, HugPages and Google Knol. Payments are based on a combination of ad revenue and affiliate fees. You’ll get higher rates doing it on your own, but these sites have a built-in supply of traffic and tools to make content creation easier.

Advertise other people’s products.

If you already have a Web site or a blog, look for vendors that offer related but non-competing products and see if they have an affiliate program. Stick to familiar products and brands – they’re easier to sell. To promote those products:

• Place simple text or graphical ads in appropriate places on your site
• Include links to purchase products you review or recommend in a blog, discussion forum or mailing list you control
• Create a dedicated sales page or Web site to promote a particular product

They all work – it just depends on how much time you have to spend on it and your level of expertise with Web design and marketing.

Related: How to Really Make Money on the Internet With an Amazon.com Affiliate Site

Microstock photography.

You don’t have to be a professional photographer to sell your photos for money. People are constantly in need of stock photography for websites, presentations, brochures and so on, and are willing to pay for the right image. People generally search for images on stock photography sites by keywords, not by photographer, so you have the same chance as anyone else of having your image picked. Just be careful that you don’t have images of trademarked brands, copyrighted art or people’s faces that are readily identifiable (unless you have a model release), but just about anything else is fair game, and I promise – you’d be amazed what people need pictures of, so don’t make any assumptions. If it’s a decent photo, upload it. Some sites to get you started include Fotolia, ShutterStock, Dreamstime and iStockphoto. The great thing about this is that it’s truly “set it and forget it”.

The above list is by no means comprehensive, but it highlights some of the new and interesting ways to make money online without investing any money, without having a product of your own, and without having expert sales and marketing skills. Most of all, unlike taking surveys or getting paid to read e-mail, the potential return on your time investment is substantial.