SPP 210: Consultants/Independent Contractors
To define a process for determining whether a consultant/independent contractor relationship exists in order for the university to properly comply with state and federal laws
IRS Regulation § 31.3401 (c)-1
Arizona Revised Statutes § 38–503
Financial Services must review requests before departments engage the services of consultants/independent contractors. This review is conducted to determine whether a true employee-employer relationship exists for federal, state, and FICA tax purposes.
Any individual performing services for the university will be presumed to work under the direction and control of the university as an employee unless the individual meets all of the independent contractor criteria established within this policy and provides the university with a valid federal taxpayer identification number (see the Financial Services Policies and Procedures Manual—FIN 421–01, “Guest Lecturers, Consultants, and Other Independent Contractors”).
If the appropriate classification is in question, departments should classify the individual as an employee. If it is later determined that an independent contractor should have been paid as an employee, the university reserves the right to charge the department engaging the “independent contractor” for taxes and penalties, if any.
|Note:||Under certain conditions, the taxes and penalties may exceed 40 percent of the amount paid to the individual.|
In order for an individual to be compensated as an independent contractor, the following four criteria must all be met:
If the relationship between the university and the provider of the service or product does not clearly meet all of the consultant/independent contractor criteria above, the individual must be hired as an ASU employee. The Office of Human Resources (OHR) is available to consult with the department and to provide available options to employ the individual.
If the individual does not meet all four criteria based on the specific facts and circumstances, the department must prepare written justification for engaging the individual as an independent contractor and attach it to the Employee/Independent Contractor Determination Checklist when submitting it to Financial Services. Final determination to appoint the individual as an independent contractor will be made by Financial Services.
This policy does not cover businesses/corporations, guest lecturers of less than two weeks’ duration, entertainers, or athletic officials functioning under Pac-12, NCAA, or similar rules. These individuals/organizations can be hired as independent contractors without the above determination of independent contractor status.
Independent contractor payments of any amount cannot be made to university faculty and staff unless they are the result of competitive bidding. This requirement does not apply, however, to a corporation in which an employee has a substantial interest, so long as the corporation was not formed to avoid this requirement. If an employee has a substantial interest in the corporation, he or she must make that interest known to Purchasing and Business Services or the Office of General Counsel and must refrain from participating in any manner in such procurement.
|Before engaging services:|
|If not approved:|
|Payables and Reimbursements||
For further information on conflict of interest, see the Academic Affairs Policies and Procedures Manual—ACD 204–08, “Conflict of Interest.”
For information on payments to nonemployees, see the Financial Services Policies and Procedures Manual—FIN 421, “Nonemployee Payments.”
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