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 control, financial control and independence must be considered. No single factor is determinative.
- 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
- 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
- The Supplier Team notifies the requesting department to process the request through the payroll system (employee) or creates 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 different types of income within the the same tax year.
Definitions
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
Last reviewed on 03/20/2024
Resources
University of Florida Policy for Hiring Independent Contractors for Academic Services
IRS Guidance: Independent Contractor or Employee?
IRS Publication 15-A: Employer’s Supplemental Tax Guide
Contacts
Tax Services: (352) 294-7266