Independent Contractors and Consultants
Introduction and Purpose
It is important for the University to properly classify Independent Contractors. Unlike employees, Independent Contractors do not have employment taxes withheld and are not eligible for university benefits. If an individual is mis-classified as an Independent Contractor and should have been hired as an employee, the university/department could be assessed fines by the IRS and/or be required to pay damages to individuals. It is critical prior to engaging an individual to provide goods and/or services for the University, a determination should be made first by the Accounts Payable department whether that individual will be paid as an employee or as an Independent Contractor. A careful review at this stage will prevent any difficulties with the Internal Revenue Service and/or the Social Security Administration later with regard to reporting and withholding. The amount of control the University has over an individual is one of the primary factors in determining the nature of an individual's working relationship to the University.
Independent Contractor Defined
Independent Contractors are individuals, partnerships, limited liability companies ("LLCs") and attorneys (regardless of organization type) who render a service and meet certain behavioral, financial and relationship factors and conditions as established by IRS criteria. They generally have a separate work place, and are not supervised when they are working for the University. An Independent Contractor generally will offer his/her services to other organizations and may advertise to the general public. They are usually paid a flat fee by the job or project and are generally not paid by an hourly, daily, weekly, or monthly rate. Section 2 of the Independent Contractor Determination and Certification form identifies all of the relevant conditions. The Independent Contractor should answer yes to all of the questions.
Employer/Employee Relationship Defined
For federal tax purposes, the relationship of employer and employee will exist when the University has the right to control and direct the individual who performs the services, not only as to the results to be accomplished by the work, but also as to the details and means by which the result is accomplished. That is, an employee is subject to the will and control of the University not only as to what shall be done, but also as to how it shall be done. In this connection, it is not necessary that the University actually direct or control the manner in which services are performed; it is sufficient if the University has the right to do so.
The individual engaged as an independent contractor to perform services is required to complete an Independent Contractor Determination and Certification Form and submit a "Scope of Work" and total cost on the Temple University's Professional Services Agreement Form. Independent Contractor Service Agreements that do not exceed a total of $5,000 may be executed by the requesting school/college/department Dean or Vice President.
Independent Contractor Service Agreements that exceed $5,000 must be attached to a Purchasing Requisition in TUmarketplace and forwarded to the Purchasing Department with a copy of all IC forms for review and approval by Accounts Payable. Issuance of a contract purchase order signed by the Director of Purchasing will follow upon approval of documentation by Accounts Payable and Purchasing.
Required Documentation for Personal Services Rendered by a Consultant/Independent Contractor
In addition to the IRS Form W-9 (Request for Taxpayer Identification Number and Certification), all departments engaging Independent Contractors must submit evidence that a contract exists between the department and the Independent Contractor. The questionnaire for determining employee or independent contractor status should be completed first before services are rendered to the Accounts Payable Department. If the services are over $5,000, you must submit this paperwork through the Purchasing department. At that time, Purchasing will forward to Accounts Payable the paperwork for determination of services only. The Independent Contractor forms are available on the Accounts Payable Forms website.
Payment for Temple Employee as an Independent Contractor to Another Department or School
An employee may provide services as an independent contractor to another department or school, provided that the following circumstances are met:
- The employee maintains outside, ongoing business providing the same services to other organizations.
- The services are unrelated to the services rendered by the employee as an employee.
- The services are not provided during the employee's work hours (when the employee is engaged as an employee).
Check Run Schedule Direct Deposits (ACH) are done daily and Disbursements (Paper Check
Runs) are done on Monday, Wednesday and Friday each week.
TEMPLE ADMINSTRATIVE SERVICE BUILDING (TASB)
Temple University (083-07)
Accounts Payable Department
1852 N. 10th Street
Philadelphia, PA 19122-8307
Phone: (215) 926-2048
Fax: (215) 926-2022 (TASB)