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Business Office

Accounts Payable

Independent Contractor vs. Employee Overview

It is critical that Hamilton College correctly determine whether the individuals providing services to the College are employees or independent contractors. Generally, the College must withhold income taxes, withhold and pay Social Security and Medicare taxes on wages paid to an employee. No taxes on payments are withheld for independent contractor services. The IRS and other government agencies assess significant penalties for misclassification of employees as independent contractors.

 

IRS Guidelines

Service provider classification is based on facts and circumstances; no one fact determines service provider classification.  The IRS currently emphasizes three broad based categories: behavioral control, financial control, and the overall relationship.

Behavioral Control: 

Independent contractors determine how they will accomplish the task.  If Hamilton provides training and/or instructions about how to complete the task, the service provider  should generally be classified as an employee.

 
Financial Control:

Independent contractors have significant investments in their businesses.  A service provider who works at home generally does not have a significant investment in the business.

 
Relationship:

Independent contractors have a broad customer base.  If the service provider works primarily for Hamilton, the service provider should generally be classified as an employee.

 

Instructions

The department head or supervisor is responsible for completing the following steps when procuring an individual's services.

  1. Submit an Independent Contractor Questionnaire to the service provider for completion and request its return directly to you.
  2. After receipt, complete the Independent Contractor Checklist.
  3. Send both original forms to the Business Office along with a W-9 for new vendors.  Upon review, a copy of the Independent Contractor checklist indicating the contractor status determination will be returned.

The table below provides information on a limited number of payments exempt from independent contract review. 

 

Services Exempt from Independent Contractor Review
Transaction Type

IC Review Required?

Written Contract Required

W-9 Required On File
Low Dollar (currently < $500)

No

Yes Yes
Architectural/Engineering Services No Yes Yes
Athletic Official No Yes Yes
Caterer

No

Yes Yes
Disc Jockey No Yes Yes
Construction Contractor No Yes Yes
Entertainer-Public Event No Yes Yes
Guest Lecturer No No Yes
Honorarium No No Yes
Human Subject Fee No No Yes
Translator: Foreign Language No Yes Yes
Translator: Deaf No Yes Yes

Writer-Scholarly publications or Hamilton Magazines

No Yes Yes

 

Cupola