Classifying a Worker as an Independent Contractor or Employee
Which documents must be submitted through the PantherExpress System for payment to an independent contractor?
This information is required to ensure compliance with IRS and other regulations. Any questions should be referred to the Purchasing Services Department.
Step 1: Establish the independent contractor in the PantherExpress System with a Supplier Verification Form and a W-9.
Step 2A: For Services Agreements valued at $10,000 or less, submit a fully executed Services Agreement (Short-Form Domestic) and the results of the 20-Factor Test through the PantherExpress System Services Agreement Specialty Form;
Step 2B: For Services Agreements greater than $10,000, submit a Contract Entry Form, Schedule-A-Scope of Services, and the results of the 20-Factor Test through the PantherExpress System Services Agreement Specialty Form.
Step 3: After a purchase order number has been generated as a result of the Services Agreement Specialty Form in the PantherExpress System, process the service provider's invoice through the "create invoice" process in the PantherExpress System.
Requirements to be classified as an independent contractor:
To be classified as an independent contractor, the 20-Factor Test result must indicate that the relationship between the University of Pittsburgh and the service provider is an independent contractor arrangement; and the service provider must meet ALL of the following requirements:
1.The individual is NOT currently an employee of the University 4. is at least 18 years of age 2. has NOT been employed by the University within the last twelve months 5. is eligible to work in the U.S. 3. is NOT a registered student at the University 6. is eligible to be employed by the University
Predetermined worker classification as an independent contractor:
The following services will not need to have a 20-Factor Test determination completed or have the determination reviewed before contracting with the service provider since the University has evaluated and classified the following general classes of service providers as independent contractors:
- Sporting officials for intercollegiate athletic
- Announcers and commentators for athletic events;
- Academic program review consultants (including
accreditation team members);
- Performers, entertainers, professional athletes,
i.e., non-employees who provide entertainment services to the University, for a
fee. Example: DJs, singers, bands, comedians, magicians, motivational speakers,
- Guest Speakers, i.e., non-employees who provide
services to the University for a fee (or honorarium) in which one-time lectures,
discourses or presentations are given before classes or audiences;
- Series editor, copy editor, manuscript reader, or book designer; and
- Trainers and consultants under contract to present seminars for the Pennsylvania Child Welfare Resource Center.
Examples of individuals NOT generally
classified as independent contractors:
Based on the Common Law Test, the following categories of workers will be considered employees, and not be considered independent contractors while performing services for the University. Payments to these workers should be made through All Temps in the Office of Human Resources; contact All Temps at 412-624-8150 for more information. The following list is not all-inclusive. Therefore, departments should determine an individual's classification by using the 20-Factor Test as a guide whenever doubt exists as to the proper classification of a service provider.
- Employees (including faculty, staff, and students) and recent former employees. If the service
provider you wish to hire is a current or recent former employee (employed by
the University in the previous 12 months), he/she will be paid as an employee
and not as an independent contractor.
- Performing routine services similar to one presently
being performed by a University employee.
- University of Pittsburgh professors, students, or staff
performing services for the University, regardless of the source of payment.
(i.e. departmental accounts, government grants, foundation funds).
- Individuals providing instruction or teaching
services. Since education is one of the University's primary missions, the IRS
will always view these types of payments as employment.
- Individuals providing administrative,
secretarial, clerical, housekeeping, maintenance, temporary or seasonal
laborers, and event workers (cashiers, ticket takers, wait staff, parking
attendants, ushers, etc.).
- Exception to Rule: Special Interest "Hobby Payments" — Payment to an employee for an activity, which could be considered a hobby or recreational vocation of the employee. The service cannot be related to the regular duties performed by the employee at the University. Whenever in doubt, contact the Purchasing Services Department prior to discussing and/or negotiating payment terms with the service provider.
Independent Contractor Tax Status – Documentation and Tax Reporting Requirements
1) Independent contractors who are United States citizens or resident aliens for tax purposes
For an independent contractor who is a United States citizen or resident alien for tax purposes, a Taxpayer Identification Number (TIN), or social security number, and a permanent mailing address are required prior to making payments to an independent contractor, since the University must accumulate payments for possible information return reporting on a Miscellaneous Income, IRS form 1099. Note: The preferred method of obtaining the TIN and address is by having the independent contractor complete a Request for Taxpayer Identification Number and Certification, IRS form
W-9. The Request for Taxpayer Identification Number and Certification, IRS form
W-9, may be obtained from Payment Processing, or from the IRS directly.
2) Independent contractors who are nonresident aliens for tax purposes
Payments made to nonresident aliens are subject to a different set of federal tax laws than are payments made to U.S. citizens or resident aliens. In general, all income paid by the University to a foreign visitor, or to a third party on behalf of the visitor, is reportable and taxable unless the income is (i) exempt from tax under the provisions of a tax treaty between the U.S. and the person's country of residence, (ii) exempt from tax under a provision in the tax code, or (iii) is "foreign source" income. To ensure compliance with these tax laws, the Foreign National Tax Processing Unit (FNTPU) is responsible for reviewing all payments to nonresident aliens before any payment is made. Determining tax reporting treatment of payments to nonresident aliens is very complex. It is not as simple as having a specific VISA type. Each individual’s situation is different.
a) Required documents for payments to a nonresident alien – The Foreign National Information Form (FNIF) and I-94
All payments to nonresident aliens must include a completed and signed Foreign National Information Form (FNIF) and a copy if the U.S. Citizenship and Immigration Services (USCIS) form I-94 (front and back). The information on the FNIF is used to analyze the nonresident alien’s residency status and eligibility for exemption from withholding through a tax treaty. It is critical that a copy of the I-94 be obtained prior to the foreign visitor's departure from the U.S. When the foreign visitor leaves the U.S. the I-94 form is surrendered to the USCIS and it cannot be obtained after that point. With the exception of certain Canadians and Mexicans, all foreign visitors will have an I-94 form.
b) Additional documents for payments to nonresident aliens
The following is a list of common documents (copies only) that should be attached to the FNIF as applicable:
- Passport including signature and photo identification, passport number and US entry VISA
- US SSN or ITIN card
- Immigration Status documents DS-2019, I-20, or I-797
- Employment Letters, Invitations and Letters of Support
- Employment Authorization Cards (front and back)
- Any other immigration documentation presented by the payee