FIN 421–01: Guest Lecturers, Consultants, and Other Independent Contractors
To permit payment for professional services rendered to the university by individuals, corporations, and other business entities not associated with ASU
Internal Revenue Service
Arizona Revised Statutes §§ 38–501 to –511
Arizona Board of Regents Policy Manual - 3-803
This procedure applies to all professional services payments to independent contractors, including honoraria and reimbursements for travel, meals, and lodging. Professional services include the following types of activities:
If an individual payee is not an independent contractor, payment must be made through the payroll system. The Tax Unit of Financial Services is available to assist departments in deciding whether a payee qualifies as an independent contractor.
ASU infrequently enters into short-term consulting agreements with individuals who are incoming employees with a start date typically six months or less in the future, or separating employees who typically are finishing up a project or otherwise assisting in the transition to a new hire. Since these engagements are established as transitional positions to facilitate the appropriate payment of wages to either exiting or entering staff, the job title is strictly a temporary one for which no waiver of employment is required. These are not faculty appointments. For tax withholding and reporting purposes, these individuals will be paid through the ASU payroll system under the Consultant (job class code 091427, Service Professional) or Senior Consultant (job class code 091000, Administrative) job classification. These appointments must be supported by a written agreement and will not be benefits eligible, but are covered by workman’s compensation.
Any exception to this policy requires approval of the associate vice president for finance, or associate director, Financial Services, Tax, and may necessitate a review by external tax counsel, with the requesting department being responsible for the external legal fees.
Payments for less than $600 coded to a services expenditure code (object 7310) can be processed without the Consultant/Independent Contractor Determination Checklist. The ASU Substitute W-9 and Vendor Authorization form is required as backup documentation for the vendor entry (VE) document. If related expenses are being reimbursed, original receipts totaling the expense reimbursement amount are required and also need to be attached. Itemized receipts are preferred and may be required in certain circumstances before reimbursement is made. If the payment for services is $600 or more per recipient, or if any recipient is expected to receive multiple payments that will be $600 or more in the calendar year, all applicable forms need to be completed and attached to the payment request.
The nominal payment rule does not apply to payments made to foreign visitors. See FIN 425 for additional information on payments to nonresident aliens.
An independent contractor is broadly defined as an individual or organization contracted to perform a particular service whereby the person who does the work exercises a greater degree of control and direction than does ASU over the manner in which the job is done. Individuals performing services for ASU under conditions whereby ASU exercises a greater degree of control and direction are treated as employees for tax withholding and reporting purposes. Independent contractors are issued IRS Form 1099-MISC reporting the amount paid for services.
For tax reporting purposes, an independent contractor may not designate his or her fee to be paid to a charitable organization. Payment for services must be made to the individual or organization contracting to provide the service.
Justification for procurement of services from lecturers, consultants, and other independent contractors is covered in the Purchasing and Business Services Policies and Procedures Manual—PUR 402–01, “Personal/Professional Services,” whereby requirements vary for the following categories:
In addition, in accordance with university policy and Arizona Revised Statutes §§ 38–501 to 38–511 (Conflict of Interest of Officers and Employees), neither the org manager, nor anyone else participating in the award decision, nor a relative may benefit financially from or be a recipient of any outside services order or related payment. Any potential conflict of interest situation must be reported to the Office of General Counsel (see the Academic Affairs Policies and Procedures Manual—ACD 204–08, “Conflict of Interest,” for additional information).
The following forms are used to process payments to independent contractors:D
|Forms for Payment to Independent Contractors|
||All service providers except:
||All individuals receiving payments for services||FIN 421–04|
||All service providers when total
payment is greater than $100 but less than or equal to $10,000 except:
||All independent contractor payments greater than $10,000; a Purchase Request (RX) must be submitted to Purchasing and Business Services||PUR 402–01|
||Eligible nonresident alien independent contractors||FIN 425–04|
||All nonresident alien individuals performing services in the U.S.||FIN 425–04|
Employee/Independent Contractor Determination Checklist
University departments must ensure that individual payees are appropriately treated as independent contractors rather than employees. Prior approval from the Tax Unit in Financial Services must be obtained before making any commitment to and/or final agreement with a consultant if the department anticipates total payments to the individual in a calendar year will be $600 or more. Prior approval is not required for service providers in item 1 under “Documentation.”
The approval process includes completion of the Employee/Independent Contractor Determination Checklist by the proposed service provider and the department, and a subsequent review of this information by the Tax Unit. Additional information may be required before an accurate determination can be made. If employment treatment is indicated as opposed to independent contractor treatment, the department will be referred to Human Resources for assistance with the hiring process. Refer to the Staff Personnel Policies and Procedures Manual—SPP 210, “Consultants/Independent Contractors,” for additional guidance.
ASU Substitute W-9 and Vendor Authorization Form
All individuals, partnerships, and corporations receiving independent contractor payment(s) greater than $100 in a calendar year must have an ASU Substitute W-9 and Vendor Authorization on file with the university before payment will be made. Departments can review the Advantage Vendor (VEN2) table to determine if a Substitute W-9 Form is already on file with ASU for that vendor. If the Substitute W-9 Form has been previously completed by the vendor, the “Tax Country” field of the VEN2 table will have an eight-digit entry indicating the country of residence and the month and year filed, e.g., US052004. If the “Tax Country” field is blank, the vendor must complete a Substitute W-9 Form before payment can be made. The department should send the Substitute W-9 Form directly to Financial Services (mail code 5812, fax 480/965–2625) for entry on the VEN2 table and should also attach a copy of the Substitute W-9 Form to the PV.
If the “Tax Country” field of the VEN2 table, or the newly filed Substitute W-9 Form, indicates that the vendor is a U.S. citizen, corporation, or partnership, no further action is required. If the vendor is other than a U.S. citizen, corporation, or partnership, Payables and Reimbursements will forward the payment request to the tax services unit to identify additional documentation needed to make payment. For example, nonresident alien individuals are required to complete an Alien Data Collection Form and will be subject to back-up withholding unless eligible to claim exemption from withholding by filing IRS Form 8233. Nonresident alien corporations and partnerships also may be subject to back-up withholding. See FIN 425–04, “Nonresident Alien Independent Contractors,” for more information on making payments to nonresident aliens.
Departmental Professional Services Order Form
For services greater than $100 but less than or equal to $10,000, a Departmental Professional Services Order must be attached to a completed PV. This form may also be used for guest lecturers, external peer review consultants, and performer fees up to a $10,000 limit. Additional documentation describing the external peer review and the individual providing the peer review consulting services must be attached with the Departmental Professional Services Order.
Original receipts are required for expenses and must be attached to the form as required by the expense summary section. Itemized receipts are preferred and may be required in certain circumstances before reimbursement is made. If the professional fee portion is paid separately (e.g., installments, subsequent PVs submitted), the original professional services payment PV document number should be referenced for expense reimbursement. Questions regarding the completion of this form should be directed to Financial Services.
Purchase Order and Contract
If the expected dollar amount to be paid for services is more than $10,000 but less than $50,000, submit a Purchase Request (RX) to Purchasing and Business Services, along with a completed Employee/Independent Contractor Determination Checklist, if necessary.
Purchasing and Business Services will determine the level of competition required and the contract forms to be used. This determination usually is made after consulting with the requisitioning department. In this case, the contract could be one of the following documents:
If the expected dollar amount to be paid is $50,000 or more, Purchasing and Business Services must conduct a sealed competitive bid and execute a formal written contract. Purchasing and Business Services is also required to advertise the solicitation (see the Purchasing and Business Services Policies and Procedures Manual—PUR 501–02, “Advertising for Bids”). Submit an RX to Purchasing and Business Services.
Upon completion of the professional services, expenses may be documented using the Expense Reimbursement Form. This form, along with any invoices from the service provider, is to be forwarded to Payables and Reimbursements in order to generate payment.
Standard Expense Reimbursement
Standard expense reimbursements for guest lecturer and consultant expenses are as follows: D
|Expense Reimbursements for Guest Lecturers and Consultants|
|Air travel||Transportation by a scheduled flight is paid at the lowest airfare available on the date of the flight, excluding excursion or economy fares. If a lecturer or consultant takes a side trip for another engagement, ASU will divide the transportation cost with the other institution proportionally. If the side trip is personal, the lecturer or consultant should assume a proportionate share of the airfare.|
|Mileage||Mileage incurred by a lecturer or consultant to travel by personal vehicle from home to the airport and back home is paid at the current mileage rate allowed by the Arizona State Department of Administration (see the ASU Travel Guide for the current rate). Mileage reimbursement is in lieu of reimbursement for original gas receipts. A lecturer or consultant may also claim reimbursement for mileage if a personal vehicle is used for transportation to Tempe; however, the reimbursement can be no higher than air coach fare to Phoenix or mileage by the most direct route, based on least cost to the university.|
|Lodging and food||For Maricopa County: Total meal and lodging expenses should not exceed allowed rates. (See the ASU Travel Guide for the current lodging and per diem
rates.) Charges in excess of those allowed under ASU travel
policies will require a written justification and may, at the
discretion of Financial Services, require dean, provost, vice
provost, or vice president approval.
Lodging is reimbursed at single occupant rates. Original receipts are required for hotel charges and must be provided. Itemized receipts are preferred and may be required in certain circumstances before reimbursement is made. Meals are reimbursed at actual cost. Receipts are required for meals exceeding the allowable per diem. Consultants should not claim reimbursement for meals provided at no cost.
|In-town transportation||Transportation costs such as charges for airport limousines and taxicabs are paid if hotel courtesy shuttle service is not available. If costs exceed $25, original receipts must be attached.|
Lecturers and consultants should pay for expenses from personal funds and then request reimbursement on a Guest Lecturers, Consultants, and Other Independent Contractors Reimbursement Form. A lecturer or consultant who charges his or her costs to a credit card usually receives ASU’s reimbursement before payment on the credit card is due if the engagement is of a short duration. Payments in excess of the standard amounts listed above must be authorized by the hosting department and may, at the discretion of Financial Services, require approval of the area’s provost/vice provost/vice president.
Prepaid Airline Tickets
Lecturers and consultants may make their own airline reservations, pay for their tickets, and then request reimbursement from the university. Departments may also use one of the university’s contracted travel agencies for prepaid travel of university guests. (See the ASU Travel Guide for a listing of contracted travel agencies.) To purchase a prepaid airline ticket, the university department must process an internal purchase order (PO), the appropriate airfare expense object/sub-object code, such as 7310-71 for consultant airfare. Before the airline ticket can be issued, the internal ASU PO number must be furnished to the contracted travel agency. Since the traveler is not an ASU employee (i.e., interviewee or consultant), the department will need to complete the Pre-Paid Airfare for Non-ASU Travelers form. Copies of the form should be maintained by the department for audit availability. The dollar amount of the prepaid airline ticket should not be included on the guest’s expense reimbursement claim. If the lecture or consulting arrangement is canceled, it is the department’s responsibility to make sure that the prepaid ticket is canceled and the money refunded.
For information on prohibiting staff or their relatives from deriving monetary or proprietary benefit from professional services rendered to the university, see the Academic Affairs Policies and Procedures Manual—ACD 204–08, “Conflict of Interest.”
For information on defining personal/professional services and in selecting the appropriate contracting mechanism, see the Purchasing and Business Services Policies and Procedures Manual—PUR 402–01, “Personal/Professional Services.”
For information on the use of and payment to consultants, lecturers, and other professionals on sponsored projects, see the Research and Sponsored Projects Policies and Procedures Manual—RSP 503–03, “Consultants, Lecturers, and Other Professional Services for Sponsored Projects.”
For information on defining a process for determining whether an employee-employer relationship exists or whether a consultant/independent contractor relationship exists in order for the university to properly comply with state and federal laws, see the Staff Personnel Policies and Procedures Manual—SPP 210, “Consultants/Independent Contractors.”
skip navigation bar