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Payroll — Independent Contractors

Independent Contractor Payments

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A guest speaker is a common independent contractor service.

Typically, Independent Contractor payments are very straightforward.  If a situation is not so clear-cut, refer to the IRS Publication 1779, Independent Contractor or Employee, in determining whether a worker is an Independent Contractor or an Employee.

“The determination is complex, but is essentially made by examining the right to control how, when, and where the person performs services.  It is not based on how the person is paid, how often the person is paid, or whether the person works part-time or full-time. There are three basic areas which determine employment status:  Behavioral Control, Financial Control and Relationship of the Parties.”  (from www.irs.gov/faqs)

Please contact Marianne Stratton, 335-2420 or Katie Villhauer, 335-2380 at the Payroll Office for assistance.

Some common Independent Contractor services include:

Independent Contractor services are not paid through the Payroll Office.  Therefore, State, Federal, and FICA taxes are not withheld and a W-2 statement of wages and taxes withheld is not issued.  If payment for such services exceeds $600 in a calendar year, a 1099-MISC income form is issued for tax purposes.

Generally, any person providing a service similar to what we have Employees doing for the University should be appointed and paid as an Employee of The University of Iowa.  An I-9 Employment Eligibility form should be obtained and appropriate taxes withheld from the payment. 

Persons who are primarily a University of Iowa Student or who are recent University Employees are probably not Independent Contractors and should be appointed and paid as Employees.  (Employment includes current, past, i.e. paid in the last 12 months, and future employment, if known.) 

Which form?   

If the person is an Independent Contractor, use the Payroll Voucher e-form.

If the person is doing work similar to what Employees are doing on campus, or doing work that is integral in nature to the business of the University, that of teaching and instruction, they should be treated as an Employee. Use an Appointment Form in the HR Transaction System on Employee Self Service.

If the person is primarily a UI Student or a recent Employee of the University, they should be treated as an Employee.  Use an Appointment Form in the HR Transaction System on Employee Self Service.

If the person is a Current Employee, use either a Special Compensation Form or an Appointment Form in the HR Transaction System on Employee Self Service.

If the person works for another State of Iowa office, use an Accounts Payable e-Voucher in FO Applications e-Pro System to pay the employing office directly.

The Payroll Voucher  (link to form)

Use this form when paying an individual:

* If you sign a contract on behalf of the University for which you do not have signature authority you may be personally liable to the vendor and to the University. Contact your immediate superior to determine who should sign the contract on behalf of the University.

Required information:

A written Professional Services Agreement (PSA) should be used for individuals who are not University Employees and who receive payments from the University in excess of $5,000 per project year. Please refer to the policies and procedures on the PSA at: http://www.uiowa.edu/~purchase/purchase/psahome.htm.

Office responsibilities

The Paying Department creates the Payroll Voucher payment request, verifying all required information.

The Payroll Office audits all Payroll Vouchers payment requests for potential employment situations and if necessary, defers to the Office of the General Counsel for review.

The Accounts Payable Office creates the Payroll Voucher payments and issues the 1099-MISC income forms at year end for payments over $600.

Payments to non-US citizens or nonresident of US territories

If the payee is not a U.S. citizen or a resident of U.S. territories, federal tax will be withheld. Requirements affecting nonresident aliens coming to the U.S. in order to participate in academic activities when an honorarium may be awarded can vary.  Please contact Pat Meskimen 335-2383, Xuefen Zhen 353-2460, or Katie Villhauer 335-2380 with questions about these rules.

The Short Term Appointment

Use this form to pay for the temporary services of an individual who is not a current full time Employee and/or who is not considered an Independent Contractor.  The form should also be used in the case of an individual who has a current relationship with The University of Iowa but who is not eligible for payment with the Special Compensation form; such as a non paying complimentary appointment, fellowship appointment, and most bi-weekly hourly Employees.  The Short Term appointment requires an effective and end date with a maximum duration of 150 days.  For services lasting longer than 150 days, a bi-weekly hourly appointment might be more appropriate.  Short Term appointments may not be used for Employees whose current appointment(s) total 100%.

The Special Compensation Form

Use this form for all "extra" payments to both full and part-time monthly paid Employees.  Employees paid on the bi-weekly hourly basis are usually not eligible for Special Compensation.  Please refer to the memo “Special Compensation Form Types/ Definitions” in the HR Transaction System for specifics. Please note that some form types require the completion of a Prior Approval form before the Payment form can be initiated. (Employee Self Service web site)

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