WORKER CLASSIFICATION (Determining Independent Contractor Status)
Independent Contractor or Employee?
Worker classification is very complex, and it is imperative that workers are properly classified. Workers who are misclassified as independent contractors when they are actually employees can expose Old Dominion University to serious tax penalties. The major focus in determining how a worker should be classified is the extent of Old Dominion University's "right to control the physical conduct and performance of services being rendered." The Twenty Factor Test and the Worker Classification Review Questionnaire are used to determine the extent of this "right to control." There are three broad categories of control that the University uses in determining worker classification:
Behavioral Control - Facts that illustrate whether there is a right to control how the worker performs the specific task for which engaged.
Financial Control- Facts that illustrate whether there is a right to direct or control how the business aspects of the worker's activities are conducted.
Type Of Relationship - Facts that illustrate how the parties perceive their relationship.
Steps in the Process
- Complete the Independent Personal Services Certification Form
- Complete either the Industry Practice (IP) Checklist OR the Worker Classification Review Questionnaire.
- If the IP Checklist can be used, submit the IPSC and the IP Checklist with procurement documentation to Accounts Payable. Be sure a W9 is on file.
- If the Worker Classification Review Questionnaire must be used, submit IPSC and questionnaire to Human Resources for worker classification.
- If Human Resources approves independent contractor status, the IPSC and Worker Classification Review Questionnaire will be returned to the department.
- Submit the approved IPSC, Worker Classification Review Questionnaire, and procurement documentation to Accounts Payable.Be sure a W9 or W8BEN is on file.
- If Human Resources determines the individual must be paid as an employee, submit appropriate payroll documentation.
The following items can assist you in determining whether you can pay an individual as an independent contractor or if you must pay the individual as an employee of the University.
Independent Personal Services Certification Form (IPSC) previously called Certified Work Statement - This form must be completed by a department each time they wish to pay someone as an independent contractor. Attach either the Industry Practice (IP) Checklist or the Worker Classification Review Questionnaire (see below to determine which must be attached), and procurement documentation before sending to Accounts Payable to request payment. The independent contractor must sign the form prior to submission, certifying eligibility to be paid as an independent contractor.
Industry Practice (IP) Checklist - For use when hiring individuals not currently employed in any capacity by ODU or the Commonwealth of Virginia.
- If the provider fits into the categories on this checklist, forward the IP Checklist and the IPSC to Accounts Payable with the appropriate procurement documentation. You do NOT need to complete the Worker Classification Review Questionnaire.
- If the provider does not fit into the categories on this checklist, you MUST complete the Worker Classification Review Questionnaire and submit it with the Independent Personal Services Certification Form (IPSC) to Human Resources for determination of worker classification.
The Twenty Factor Test -These factors can assist you in determining whether an individual might qualify to be considered an independent contractor. If you feel the individual should be paid as an independent contractor, complete the Worker Classification Review Questionnaire and forward it with the Independent Personal Services Certification Form (IPSC). If an individual does not qualify to be considered an independent contractor, you must pay the individual through the Payroll process.
Worker Classification Review Questionnaire (previously called Independent Contractor Questionnaire) - If a provider does not fit the categories on the Industry Practice (IP) Checklist, Departments must complete this questionnaire to determine if an individual is eligible to be paid as an independent contractor before any contractor is engaged to perform services for the University. This questionnaire is to be used for all services not included on the Industry Practice (IP) Checklist. (see sample questionnaire). This form is not to be completed by the proposed independent contractor. All questions must be answered, and the appropriate departmental representative must sign the Questionnaire. A decision concerning the information on the questionnaire will be returned to you within 2 working days after submission to Human Resources.
If the proposed independent contractor must be hired as an employee, the Department of Human Resources will contact the department. If the person can be paid as an independent contractor, the Department of Human Resources will return the approved Independent Personal Services Certification Form (IPSC) and the Worker Classification Review Questionnaire to the department. The signed IPSC, along with a copy of the approved Worker Classification Review Questionnaire and the appropriate procurement documentation should be submitted to Accounts Payable to request payment. The department should maintain the original approved Worker Classification Review Questionnaire in their files. The Department of Human Resources DOES NOT keep a copy on file.
Hiring an individual with a previously-approved Worker Classification Review Questionnaire?
When a department wishes to pay a person (for whom the department previously completed an IPSC and Questionnaire for another event which was approved by the Department of Human Resources), the department should complete a new IPSC for the new event and attach a copy of the previously approved Questionnaire, noting that all information contained on the Questionnaire is still valid. Send both forms to Human Resources for processing.
Employees Performing Work Outside the Scope of Normal Job Duties
Many employees perform work for the University that is outside the scope of their normal job duties. It is important that we pay each employee appropriately so that we can accurately report earnings to the Internal Revenue Service. To ensure that individuals claiming independent contractor status are claiming this status appropriately, the Internal Revenue Service scrutinizes the returns of individuals who receive both a W-2 and a form 1099 for the same calendar year from one employer. They also scrutinize the returns of individuals who received a W-2 for a prior year and then receive a form 1099 for the next calendar year from the same employer.
If you hire employees (or students enrolled in credit classes) of the University to perform a service for the University outside the scope of their normal duties, they must be paid through the payroll process. Employees who perform services outside their normal job duties cannot submit an invoice to Accounts Payable since Old Dominion University's policy is that individuals cannot receive both a W-2 as an employee and a 1099 as an independent contractor from the University in the current or prior calendar year.
Paying International Visitors
Old Dominion University, in fulfilling its mission, conducts a variety of public events and functions. In addition, colleges and departments of the University also invite guest speakers/lecturers and performers to campus for academic symposia, class lectures or in support of specific educational, research or public service missions of the unit. In the event that those individuals who are invited are international visitors, very specific additional paperwork is required to ensure compliance with various federal and state taxing authorities and immigration guidelines.
Certain expenditure reimbursements and/or honoraria may not be allowed or may be delayed if you do not contact the Office of International Student and Scholar Services (757-683-4756) and the Payroll Manager (757-683-3014) in advance to ensure that any additional paperwork is completed properly and in a timely manner.
No payments to an independent contractor will be processed without the approved Worker Classification Review Questionnaire/Industry Practice (IP) Checklist (whichever applies), the approved Independent Personal Services Certification Form (IPSC), and a W-9 or W8BEN on file - whether paid via purchase order or memo.
Questions about determining independent contractor status (worker classification) should be directed to Cori Duck, Accounts Payable Manager.