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AP_1099_Reporting_Policy

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					                                      FACILITY NAME
       ACCOUNTS PAYABLE POLICY                                Subject Title:
                                                              Form 1099
                                                              Policy No.


Subject:                                 Applicable departments:      Date:    Effective Date:
Form 1099                                Accounting
                                                                   12/22/07      12/22/07




   1.0 PURPOSE

     The purpose of this policy is to establish the responsibilities, controls, and procedures
     for the preparation, review and distribution for Form 1099 Information Returns.

   2.0 POLICY SCOPE
     This policy applies to anyone who processes payments for vendor invoices originating
     from the United States.

   3.0 POLICY PRINCIPLES
     3.1 We are required by the Internal Revenue Service (IRS) Regulations to issue a
     Form 1099 to recipients of payments from us during the calendar year based on
     guidelines outlined in the code.

     3.2 We must acquire certain vendor information as requested in the New Vendor
     Form and either a Form W-9 and classify payments in the financial accounting system
     so that the proper Form 1099 may be issued to the IRS and the payee at the end of
     the year.

     3.3 The Form W-9 is required from all vendors or individual payees prior to set up in
     our vendor data base. Otherwise, the payee may be subject to backup withholding
     as defined in the IRS information return statutes. These documents are retained on
     file to provide evidence of the status of an organization or person and certifying their
     taxpayer identification number (TIN).

     3.4 All vendors classified as independent contractors must meet the IRS guidelines
     for this classification versus classifying them as an employee.
3.5 General principles relating to when or when not to file an information return on
Form 1099 that are applicable:
   A) Generally, sole proprietorship or partnership companies with total calendar year
   payments from us over $600.00 require filing a Form 1099. However, see the IRS
   Regulations section 1.6049-4(C)(1)(A) for further details.

   B) Payments to corporations are not reportable on Form 1099 except for the
   following:
    Medical or health care payments (Form 1099-MISC)
    Withheld federal income tax or foreign tax
    Acquisitions or abandonment of secured property (Form 1099-A)
    Payments of attorney’s fees and gross proceeds paid to attorneys (Form 1099-
       MISC)
 [The above criteria in section 3.5 were obtained from the IRS publication General Instructions for Forms 1099,
1098, 5498 and W-2G]

3.6 Penalty
The IRS may assess a penalty to us for any Form 1099 submitted that results in:
    Failure to file correct Form 1099 by the due date (section 6271 of IRS
      Regulations)
    Failure to furnish a correct payee statement (section 6722 of IRS Regulations)
    Fraudulent filing of Form 1099

The failure for us to file a timely and accurate Form 1099 can result in penalties up to
$250,000 (General Instructions for Forms 1099, 1098, 5498, and W-2G page GEN-4).

3.7 Magnetic Media/Electronic Reporting
The IRS requires companies to report their 1099 information returns to them either
using an approved magnetic media or an electronic file transfer. In general, if a
company is filing 250 or more Form 1099s, then they are required to file the forms
either on a magnetic media or as an electronic file. This requirement is based on the
number of each separate type of 1099 form. For example, if the Company is filing
100 1099-MISC and 300 1099-DIV, then only the 1099-DIV are required to be filed
electronically or with magnetic media.

Electronic submissions must be done through the Filing Information Returns
Electronically System (FIRE System) which is accessible via a PC and dial up modem.
See the IRS publication General Instructions for Forms 1099, 1098, 5498, and W-2G
for further details.
[The above criteria in section 3.7 are excerpts from the IRS publication General Instructions for Forms 1099,
1098, 5498, and W-2G)]




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4.0 RESPONSIBILITIES

 4.1 The Accounts Payable person is responsible for the set up of a new vendor in the
 our data base and to ensure information is provided via a W-9 to establish the
 classification of the vendor for Form 1099 reporting.

 4.2 The Accounts Payable person is responsible for the preparation of the Form 1099,
 the accuracy of the information provided on the form and the timely delivery of the
 form to the payee and IRS.

 4.3 The CFO is responsible for mailing all outgoing Form 1099s.

 4.4 The Accounts Payable person is responsible for the actual printing of the Form
 1099 from the Accounts Payable system. (Because we generally do not meet the
 IRS guidelines for magnetic media/electronic reporting to the IRS. But,if you do, this
 person would assists in the preparation and distribution of the file.

5.0 POLICY PRACTICE STATEMENT

 5.1 Form W-9 and Form W-8
 The Company requires that all vendors complete either a Form W-9 or Form W-8 to
 certify their federal taxpayer identification number and the form must be on file prior
 to the Company making a payment to the vendor. Otherwise, the Company may be
 required to withhold a portion of the payment as backup withholding in accordance
 with the IRS Regulations. A Form W-9 must be completed by a taxpayer who is a
 U.S. person (including a resident alien) to certify their TIN and claim of exemption. A
 Form W-8 must be completed by a foreign person or organization to certify their TIN
 and any claims for exemption.

 The Form W-8 consists of multiple types of forms and used based on the type of
 foreign person or organization. Links to the instructions are provided below.
     Instructions Form W-9 – go to web site for irs.gov/pub/irs-fill/fw9.pdf
     Instructions Form W-8BEN – go to web site for .irs.gov/pub/irs-fill/fw8ben.pdf

 5.2 Vendor Classification
  The classification of a vendor in the data base determines whether or not a Form
 1099 will be issued. The type of payment will determine which Form 1099 will be
 used to report the amounts paid to the IRS and the payee. The Vendor Information
 Form and the W-9 or W-8 must be on file in order to set up the vendor properly and
 no payment will be made to the vendor without this documentation.

 5.3 1099 Reporting Deadlines
 The general guideline for mailing the forms to the recipient payee is January 31st
 and the copy to the IRS is due by February 28th. The forms must be post marked


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on or before the due date. This is only a guide; verify the deadlines in the IRS
publication General Instructions for Forms 1099, 1098, 5498, and W-2G. The
Company also publishes a 1099 Information Return Matrix and a monthly calendar of
timelines for the preparation and delivery of the forms
5.4 Calendar Semi-Annual Review
Semi-annually of the calendar year, the Accounts Payable person will run a
management report, to review with the CFO, the status and classification of the
vendors in the data base. This process must ensure that all of the appropriate
documents are on hand to properly classify a vendor in the 1099 reporting process.
At a minimum, the following should be reviewed:
    Signed Form W-9 or W-8 on file
    Corporate organizational status (e.g. corporation, nonprofit…) provided on the
      Vendor Information Form on file
    Settings in the vendor data base management report (compare to the
      documents on file for classification).

5.5 Distribution
The distribution of the Form 1099 must be completed (i.e. post marked) on or before
the due data as specified in section 5.3.
   A) Copy A of Form 1099 to IRS filed with Form 1096
   B) Copy B of Form 1099 to Payee
   C) Retain a copy for the Company’s records

The magnetic media or electronic file is generated by the financial accounting system
and must be delivered on or before the due date and filed with Form 4804.

5.6 Mailing
The Accounts Payable person provides a list of Form 1099s along with the actual
forms in a sealed envelope for mailing to payees. The CFO compares the list to the
actual envelopes received to ensure that all forms are mailed. Any missing
documents are noted and the Accounts Payable person is immediately notified. The
CFO signs the list, indicating all documents as noted on the list have been mailed,
and returns it to the Accounts Payable person for filing.




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