An independent contractor is a person who is contracted to perform services without having the status of an employee.
It is illegal to knowingly classify an employee as an independent contractor in order to avoid Affirmative Action recruitment efforts, and/or to avoid payments such as employment taxes and fringe benefits. The IRS imposes fines and penalties for misclassification of service.
A previous determination received from the IRS places specific classes of individuals in two different categories — independent contractor or employee. This list is not meant to be all inclusive, but highlights some of the major classes of individuals.
Includes the following:
Includes the following:
Complete and submit:
for payment to someone who is an Independent Contractor (and is not an employee of UB, the Research Foundation or UBF).
This process is necessary in order to establish the relationship with the individual as being independent of an employer-employee type which would subject the payment to payroll taxes. An employee is defined as an individual who performs services for which the employer controls the method of what will be done, how it will be done, and the result of the services. Generally, people in business for themselves are not employees.
There are varying requirements to provide payments or reimbursements to people who are in the U.S. under a visa, depending (in part) on the person’s exact status, and whether or not there is a tax treaty between the U.S. and that person’s home country.
Various requests are submitted to provide payments for service or expense reimbursements to guest lecturers and other visitors/students who are in the U.S. under a visa.
The Internal Revenue Service continues to impose more restrictive regulations relative to payments to non-citizen independent contractors. The following information is required in order to process a payment to a foreign individual.
A Disbursement Request Form and Independent Contractor Questionnaire Form must also be completed and submitted for international independent contractors.
Every individual will have either a visa or I-94 Form. These forms determine if the independent contractor is entitled to reimbursement for services and/or expenses. In order to be reimbursed the individual should have the following:
This information should be documented by completing the Determination of Residence Status for Federal Tax Withholding form and when the payment represents an Honoraria, the Request For Alien Information and Certification of Eligibility for Payment of Honoraria form (these forms should be completed by the individual to be paid) and should be submitted with a copy of the appropriate visa or I-94 page attached.
After identifying that the visa status will allow for payment to be made, the following forms are needed:
a. If there is a TAX TREATY between the U.S. and the individual's country:
NOTE: Information on the Tax Treaties can be obtained from IRS Publication 901, U.S. Tax Treaties.
b. If there is NO TAX TREATY between the U.S. and the individual's country, Form W-8 and the Determination of Residence Status for Federal Tax Withholding form which identifies the individual as a nonresident alien who is not subject to certain U.S. information return reporting or backup withholding. When there is no tax treaty in place, UBF must withhold 30% of the payment and remit it to the IRS. This withholding applies to both payment for services as well as travel related expenses. The individual may be able to receive a refund of this amount from the government at the end of the year.
In 1996, the IRS issued final regulations which required that resident and nonresident alien individuals obtain an individual taxpayer identification number (ITIN). IRS Form W-7 is available to apply for this number. This number will also be required on Form 8233 when it is submitted to the IRS. Hence, this ITIN number must be obtained before the Form 8233 can even be submitted to the IRS and the delay in payment once the Form 8233 has been submitted remains in effect as described in Section 2a above.
Following the IRS accountable plan guidelines, travel expenses can be reimbursed to a foreign individual upon receipt of the following information:
In some instances payment for goods or services can be facilitated via wire transfer.
The Wire Transfer form has been provided by the bank in order to insure that wire transfer requests can be completed in an accurate and timely manner. It must be filled out completely (especially Bank Wire Number) and submitted in order to complete a wire transfer. Please note that this form must be typed.
CONSULT WITH YOUR UNIT BUSINESS OFFICER FOR INITIAL CLARIFICATION OR INTERPRETATION QUESTIONS.