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Employee vs. Independent Contractor Determination

Directive Statement

If employees and independent contractors are not appropriately classified, employment taxes and corresponding federal reporting will be incorrect.

Reason for Directive

The purpose of this directive is to comply with the Internal Revenue Code (IRC) regarding proper recognition and taxation of employee wages.  Compensating UF employees for work or services provided in additional to their regular job appointment is generally still considered wages subject to employment taxation.  Compensating these individuals through Disbursements or by any means outside of the payroll system does not appropriately capture the income for taxation and federal reporting purposes.

Who must comply?

All university departments.

Procedures

On a case-by-case basis, relevant facts and circumstances are evaluated to determine if an individual should be compensated as an employee or an independent contractor.  All information that provides evidence of the type of relationship and the degree of behavioral controlfinancial control and independence must be considered.  No single factor is determinative.

  1. The requesting department prepares a Supplier Tax Information Form (STIF) for the potential vendor/supplier.  The Supplier Team reviews the initial responses.  If any responses give rise to potential employee treatment (e.g. the person is a current UF employee), the STIF is shared with Tax Services for a determination
  2. Tax Services reviews the STIF and gathers additional clarification from the requesting department or Human Resources, providing the Supplier Team with a determination of employee or independent contractor treatment
  3. The Supplier Team notifies the requesting department to process the request through the payroll system (employee) or to create a supplier record for payment (independent contractor)

UF academic policy requires that for all for-degree-credit courses, no matter the funding model or delivery modality, the instructor must be a UF employee.  You may not use independent contractors or companies to teach or support UF for-degree-credit courses (University of Florida Policy for Hiring Independent Contractors for Academic Services).

UF issues employees a Form W-2 at the end of the year to reflect their employment income and taxes.  UF issues Independent Contractors a Form 1099-MISC for applicable payments made by UF during the year.  In limited circumstances (e.g. royalty income) a UF employee may receive both a Form W-2 and a Form 1099-MISC for the same tax year.

Definitions

Employee

You are an employee if you perform services that can be controlled by an employer (what will be done and how it will be done).  This applies even if you are given freedom of action.  What matters is that the employer has the legal right to control the details of how the services are performed, whether or not the right is actually exercised.

Independent Contractor

People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors.  However, whether these people are independent contractors or employees depends on the facts in each case.  The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.  Simply calling someone an independent contractor does not necessarily make it so.

Behavioral Control

Behavioral control refers to facts that show whether there is a right to direct or control how the worker does the work.  A worker is an employee when the business has the right to direct and control the worker.  The business does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work.  The behavioral control factors fall into the categories of:

  • Type and degree of instructions given
  • Evaluation systems
  • Training

Financial Control

Financial control refers to facts that show whether or not the business has the right to control the economic aspects of the worker’s job.

The financial control factors fall into the categories of:

  • Significant investment
  • Unreimbursed expenses
  • Opportunity for profit or loss
  • Services available to the market
  • Method of payment

Type of Relationship

Type of relationship refers to facts that show how the worker and business perceive their relationship to each other.  The factors, for the type of relationship between two parties, generally fall into the categories of:

  • Written contracts
  • Employee-type benefits
  • Permanency of the relationship
  • Services provided as key activity of the business

Last Reviewed

05/01/2020: reviewed content

Resources

University of Florida Policy for Hiring Independent Contractors for Academic Services

IRS Form SS-8: Determination of Worker Status

IRS Guidance: Independent Contractor or Employee?

IRS Publication 15-A: Employer’s Supplemental Tax Guide

Contacts

Tax Services: (352) 294-7266