All persons rendering services to the University must be paid through the Payroll System except those contracted as an independent contractor. The following should help you determine if an independent contractor relationship exists.

PLEASE NOTE: State employees are not authorized to be paid consultant fees by the University. This restriction also applies to corporations and partnerships in which an employee of the University or faculty member serves as either a principal or employee. Issues involving conflict of interest are subject to State criminal statutes.

Generally, independent contractors are paid from object codes in the 1900 range. Please refer to the Chart of Accounts for proper coding. Note that if the University is paying travel expenses for a contractor, a different object code is used for the travel if the contractor submits their travel to the University (documented reimbursement).

The Internal Revenue Service generally recognizes two of the four common types of employment relationships as applicable to the University. These relationships are:

Independent Contractor

Individuals who follow an independent trade, business, or profession are generally not employees. This category includes lawyers, contractors, subcontractors, accountants, consultants, and others who offer their services to the general public. The general rule of thumb is that an individual is an independent contractor if the employer has the right to control or direct only the result of the work and not the means and method used to accomplish the result. Refer to the "Twenty Common Law Factors" for additional help.

Common Law Employee

Under common law rules, individuals who perform services that are subject to the will and control of an employer as to what must be done and how it must be done is an employee.

If there is an employee relationship it makes no difference how it is described. Consequently, it does not matter how the payments are measured, how they are made, or what they are called. Also, it does not matter if the employee is full time, part-time or is hired only for a short period.

Statutory employee (commission based employees, full-time sales agents, etc.) and Statutory Non-employee (direct sellers, licensed real estate agents, etc.) situations generally do not apply to the University.

TAX WITHHOLDING FOR INDEPENDENT CONTRACTORS: 1099-MISC
Payments to independent contractors are made through the accounts payable process - not through Payroll. The University does not withhold or pay income or social security taxes on payments made to independent contractors. Individual independent contractors are responsible for these taxes as well as the self-employment tax. Independent contractors will be sent a Form 1099-Misc at the end of the year if payments made during the year aggregate $600 or more. Backup withholding may be required if the independent contractor does not furnish the University with a Taxpayer Identification Number.

See also:

1099 REPORTING REQUIREMENTS

CRITERIA TO DISTINGUISH EMPLOYEE/INDEPENDENT CONTRACTOR