Independent Contractors

Payment Procedures for Personal Services/Independent Contractors

Review the information below to determine the correct tax status and payment method for your vendor. Use the Independent Contractor or Employee Form for payments to independent contractors unless they meet one of the following categories:

1. guest speakers
2. guest class lecturers
3. guest artists and performers
4. athletic game officials
5. rental services for facilities, equipment and tapes
6. financial and legal services provided by individuals who perform these services for the general public
7. medical services
8. University Interscholastic League judges and assistants
9. accreditation evaluation services
10. professional models

Attach electronically to your requisition. The form can either be preapproved by the UNT System Tax Accountant, or you can ad hoc the requisition for approval. For an individual with a tax status that is not a U.S. citizen, complete and attach the Foreign National Information Form.

Questions concerning these procedures should be directed to the University Tax Accountant in the Payroll Office (ext. 5500).

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Any individual or company receiving payment for goods or services is required to provide a valid Social Security Number (SSN), an Individual Taxpayer Identification Number (ITIN), or a Federal Employer's Identification Number (FEIN) in the case of a corporation or partnership. The IRS Form W-9 is used by US persons and resident aliens to report their correct taxpayer identification number. If the payee is a foreign company or a foreign individual (non-resident alien for U.S. tax purposes), they should complete the appropriate Form W-8. The W-8BEN is for individuals and the W-8BENE is for entities. For assistance in determining the appropriate IRS forms contact the University Tax Accountant in the Payroll Office.

The department should determine the independent contractor’s residency status for U.S. tax purposes before services are rendered. If the individual is a foreign national (either a resident alien green card holder or non-resident alien), the Foreign National Information Form must be completed and sent to Payroll prior to processing the requisition. If the foreign national's U.S. tax status changes from the date the original Foreign National Information Form was submitted, a new form must be completed, signed and forwarded to Payroll.

Key Factors Indicating Independent Contractor Status

• The University does not possess the right to instruct the person about how the work is to be performed versus an employee who must comply with instructions about when, where and how the work is to be performed.
• Independent contractors ordinarily use their own methods and receive no training from University personnel.
• An independent contractor may hire, supervise, and pay other workers under a contract.
• Independent contractors generally set their own work schedules and are responsible only for the end results.
• Independent contractors are normally paid by the job in a lump sum or on a commission basis. Payment by the hour, week, or month at frequent intervals or on a continuing basis is a strong indication that the worker is an employee and not an independent contractor.
• The independent contractor is free to work when and for whom he/she chooses marketing their services to the general public.
• Independent contractors normally furnish their own tools and materials.
• An independent contractor is generally in a position to realize a profit or suffer a loss as a result of the services performed. Opportunity for profit or loss may be established factors, among the most important of which are the following:
  1. continuing recurring liabilities or obligations, with success or failure depending on the relationship of receipts to expenditures;
  2. the individual’s services establish or affect his/her business reputation and not the reputation of those who purchase the services;
  3. the individual has his/her own office, equipment, materials, or other work facilities.
• An independent contractor cannot be fired so long as the results meet the conditions of the contract.
• An independent contractor usually agrees to complete a specific project and is responsible to do so satisfactorily or is legally obligated to make good on the failure to do so. An employee can quit a job without incurring liability.

Employee Payments

Any person who is a current employee or who has been an employee of the University during the past twelve months cannot be paid as an independent contractor on a purchase order. Payment must be made through Payroll and appropriate taxes will be withheld. Reimbursement for any goods associated with the service for which the employee is being paid can be made, with appropriate documentation, using the check request process. NOTE: This paragraph refers to goods and services only. Royalties and other payments for intellectual property are covered in another policy.

Payments to Foreign Nationals (Non U.S. Citizens)

In order to make a payment to a permanent resident alien (green card holder), a resident alien for tax purposes, or a nonresident alien for tax purposes, the IRS requires that the individual must have either a social security number or an individual taxpayer identification number (ITIN). Please refer to the University’s FOREIGN NATIONAL PAYMENT PROCEDURES. This document can be obtained by contacting the University Tax Accountant, located in BSC Payroll. Please review the GENERAL INFORMATION section and the discussion on Independent Services (Outside Contractors) in those procedures.

Nonresident aliens performing independent contractor services for the University should be advised to obtain a social security number or Individual Taxpayer’s Identification Number (ITIN) immediately upon entering the U.S. if they do not already have one. The UNIVERSITY cannot pay any individual unless we have a number or proof (receipt from the issuing agency) that application for a number has been made.

Departments are advised to check the individual’s visa status PRIOR to negotiating for any services and/or payment terms. Some visa types are very restrictive in the type of payment and/or by whom it can be made (visa type information is available in the FOREIGN NATIONAL PAYMENT PROCEDURES document --ATTACHMENT I of that document). Questions should be directed to the University Tax Accountant in the Payroll Office.

In an effort to obtain certain documentation required by the IRS for payments to non-U.S. citizens, all foreign national independent contractors providing services to the University must complete AND sign the Foreign National Information Form and submit this form with the required copies of immigration documents to the Payroll office IN ADVANCE of processing the purchase order. An incomplete form or a form submitted without the proper attachments will delay payment to the independent contractor. A new form must be completed and immigration documents must be submitted each time services are provided. Please note on the purchase order that a Foreign National Information Form has been submitted to Payroll.