Independent%20Contractor%20or%20Casual%20Employee?

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Independent Contractor or Casual Employee?
What is the APS form and PBS document?http//www
.utexas.edu/business/accounting/webhelp/pbs_info.h
tml
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Independent Contractor or Casual Employee?

• Office of Accounting
• Cynthia Roberts, CPA
• Finance Manager
• Travel
• Independent Contractors
• Scholarships
• Lori Monson
• Senior Administrative Associate
• Independent Contractors

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Class Objectives

• When is a PBS/APS used as an authorization tool?
• Determine when the PBS is required and when the
  paper APS form should be used.
• Identify the essential elements within a PBS or
  an APS.
• Know when a new PBS must be created if changes
  occur.

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Class Objectives

1. Learn the classification criteria used to
   identify an individual as a casual employee or an
   independent contractor.
2. Learn how to use the Employee/Independent
   Contractor Classification Checklist to determine
   whether an individual will be paid on a VP2 or an
   OV7.
3. Practice Session Different scenarios, different
   outcomes.

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PBS document / APS Form

• Required for one-time, short-term, or sporadic
  services provided by an individual or
  unincorporated sole proprietor (including DBAs)
  for any vendor whose VID starts with a 2 and
  has the SSN embedded.
• Continuing full-time appointments of two weeks or
  longer should be handled using standard HR
  procedures.

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PBS document / APS Form

• Continuing maintenance contracts or other
  recurring services or services subject to bidding
  requirements should be handled using standard
  purchase order procedures.
• Contracts should be used when the payment is
  anticipated to total more than 25,000 in any one
  fiscal year period, or when special terms, such
  as first class travel or fee pre-payments, are
  required. Consulting services should only be
  authorized with a formal contract.

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Consulting Services

• Strict State Definition
• A study conducted for a state agency or advice
  provided to a state agency under contract that
  does not involve the traditional relationship of
  employer and employee. The term does not include
  a routine service that is necessary for the
  functioning of a state agencys programs.
• A formal contract should be prepared instead of a
  PBS when authorizing consulting services.

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Electronic PBS document

• The required authorization document for all
  services procured after June 24, 2006 when
  possible.
• Paper form Employee/Independent Contractor
  Classification Checklist (EICCC) is required in
  addition to either the paper APS or the
  electronic PBS.
• Approved document is printed and signed after
  services have been performed, just like the APS,
  and sent with the EICCC to the Office of
  Accounting (VP2) or Payroll Services (OV7) based
  on the employee/independent contractor
  determination result determined by answers on the
  EICCC.

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Paper APS form

• Allowed for services authorized after June 24,
  2006 if any of the four following conditions
  exist
• A Contract Grants (26) account must be used.
• Payment will be made to a foreign visitor
  (non-U.S. citizen) with no SSN or US taxpayer
  number (ITIN).

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Paper APS form (cont.)

• Only direct billed travel expenses are authorized
  and no payment will be made directly to the
  traveler (Reminder You should continue to use a
  VE5/VP5 to authorize expense reimbursements to an
  individual when no fee is to be paid).
• A blanket APS is needed or preferred for multiple
  individuals' fee payments, direct billing
  authorizations, or expense only reimbursements.

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Paper APS form Required for Taxable Travel

• Spousal/family members travel Travel
  reimbursements (or directly billed travel, such
  as centrally billed airfare, car rentals, and
  hotel or apartment charges) are authorized as a
  fee payment to the individual conducting business
  with the university or interviewing with the
  university, not to the spouse or other family
  member accompanying the university visitor.

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Paper APS form Required for Taxable Travel

• Spousal and other family members travel is fully
  taxable, and an IRS form 1099-MISC will be issued
  to the university visitor if the total of all
  spousal/family members travel exceeds 600
  during one calendar year. University employee
  spousal travel is prohibited, except as
  authorized by the UT System Business Procedures
  Memorandum 65-07-02.
• Please see http//www.utsystem.edu/BPM/65.htm
  for more detail on this policy.

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Paper APS form Required for Taxable Travel

• Moving expense direct billings for new hires and
  their family members are authorized using the
  paper APS form for centrally billed airfare, car
  rentals, and directly billed apartments or other
  temporary lodging.
• The paper APS is a substitute authorization that
  can be sent to the travel agency, car rental
  agency, hotel, etc., as a substitute for the
  offer letter. The offer letter is used to
  authorize reimbursements paid directly to the
  individual (the newly hired university faculty or
  staff member).

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PBS document / APS Form

• Identical information is required for either
  method.
• Electronic PBS has additional features
• Specific accounts can be identified for fee,
  centrally-billed airfare, other travel, etc. and
  amounts can be split among accounts.
• Electronic approval via electronic routing
  (similar to RTA by appointment and/or account).

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PBS document / APS Form

• Electronic PBS has additional features
• Electronic Dean/VP routing (replaces DFA manual
  signature).
• Audits for prior payments during current fiscal
  year period.
• Audits for current employment.

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Guidelines Period of Appointment

• A separate authorization document for each unique
  fiscal year is required for either the paper APS
  or the electronic PBS.
• Example If services are provided 7/1/08 to
  6/30/09, two forms (first ending on 8/31/08) are
  required.

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Guidelines Compensation

• Limited to 15,000 for services.
• Travel/Business Expenses may be allowed in
  addition to the 25,000 for services.
• No limit for service fees paid to Non-US Citizens
  performing services outside the US. (Object code
  1326 must be used).

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Guidelines Current Employee

• A PBS or APS may be appropriate when the
  following applies
• Duties outside regular employment.
• Within same department for continuing education
  or dissimilar services only.
• Across departmental lines, unless normal job
  duties routinely cross departmental lines.

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Guidelines Current Employee

• Approval of Chairman/Director of Employees
  appointing department is required. The APS
  requires a manual signature the PBS will route
  for electronic approval from the appointment
  account.
• Compensation to full-time university employees
  from federal grants or contracts requires
  specific authorization in the grant or written
  approval by the sponsoring agency.
• Note The paper APS is required when using
  26-accounts.

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Guidelines Former Employee

• Former employees will always be paid through
  payroll if
• They were employed during the prior 12 months or
  current calendar year. State vs. Local funds.
• A continuing relationship with employer exists.
• They have been paid through Payroll during the
  calendar year.
• Exceptions granted on a case-by-case basis when
  services are not similar to those performed while
  an employee at the university.

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Procedures for Authorization of Professional
Services

• Complete APS Form or Complete PBS Document
• and
• Complete Independent Contractor/Employee
  Classification Checklist

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Completing the APS or PBS

• Name and Address
• UT EID or VID
• Nature of Services
• Description of Services
• Qualifications
• Employment Status
• University Employee
• Other State Agency Employee
• Nepotism Statement

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Completing the APS or PBS

• Proposed Payment
• Lump Sum Vs. Daily Rate (Federal projects)
• Transportation Other Expenses
• Estimated Totals

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Completing the APS or PBS

• Period of Appointment
• Account Information
• Requesting Department (on paper form only)
• Form preparer with phone number (on paper form
  only) or document creator

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Completing the APS or PBSApproval

• Approved PRIOR to services being performed
• Paper APS requires
• Signature of the Principle Investigator on
  26-accounts.
• Signature of the Chairman/Director
• Signature of the Dean or DFA

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Completing the APS or PBSApproval

• Approved PRIOR to services being performed
• Electronic PBS requires
• Electronic signature from appointment account
• Electronic signature from each account signer
• Electronic signature from Dean/VP

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PBS Changes

• The following changes are possible by adding
  notes to the PBS
• Changes to a vendor address
• Changes to nepotism statement
• Payment amount increase of less than 10 percent
  of the original authorized total amount

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Signature of Contractor

• After services are performed, the contractor
  signs and dates at the bottom of the paper APS
  form or an approved copy of the PBS doc.
• The signature must be dated on or after the date
  services were actually performed.
• The VP2 service dates must be within the dates
  authorized on the APS or PBS with a signature
  dated on or after the VP2 or OV7 ending service
  date.

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Worker Classification

• Common Law Test
• Right to Direct or Control
• 20 Questions
• Behavioral control, financial risk, relationship
  of parties

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Worker Classification

• Behavioral Control
• Students
• Supervision
• Financial Risk
• Usually not an issue with the university
• Flat rate vs. hourly rate
• Relationship of parties
• Prior employment
• Exclusive relationship (sole customer)

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Independent Contractor/Employee Classification
Checklist

• Who should complete the checklist?
• When should the checklist be used?
• When is a signature required in the Terms
  Conditions for Federally Sponsored Projects box?
  Who signs in this box? When should the signature
  be obtained?

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Completing the Checklist, Part I

• Relationship with The University
• Part I of the checklist should always be
  completed.
• Does this individual currently work for the
  university as an employee?
• Has an offer of employment been extended to this
  individual?
• Did this individual work as an employee of the
  university during the 12 months prior to the date
  of this contract?

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Completing the Checklist, Part I

• If the answer to any of the questions in Part I
  is Yes, STOP! The individual is classified as
  an employee.
• If you answered no to all of the questions, you
  must proceed to Part II.

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Completing the Checklist, Part II

• Complete only
• Section A or B or C
• But not more than one, based on the nature of the
  services performed.

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Part II Section A, Teacher / Lecturer /
Instructor

• Is the individual an invited guest lecturer
  (includes seminar, colloquium, class, etc.)?
• Has the individual been at the institution in
  this capacity fewer than four times in the past
  12 months?
• If the answer to both questions is Yes, STOP.
  Treat the individual as an independent
  contractor.
• If the answer to either question is No, proceed
  to Question 3.

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Part II Section A (cont.)

• 3. Is the individual teaching in a course for
  which students will receive credit toward a
  university degree?
• If the answer is Yes, STOP. The individual is
  classified as an employee.
• If the answer is No, proceed to Question 4.

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Part II Section A (cont.)

• Has the individual provided the same or similar
  services as an ongoing business to other
  unrelated entities in the past 12 months?
• Does the university have any control over course
  materials that are used by the individual?
• If the answer to Question 4 is Yes and the
  answer to Question 5 is No, treat the
  individual as an independent contractor.
  Otherwise, treat the individual as an employee.

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Part II Section B, Researcher

• Will the individual perform research under the
  supervision of a university professor or
  employee?
• If the answer to Question 1 is Yes, treat the
  individual as an employee.

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Part II Section B (cont.)

• Will the individual serve in an advisory or
  consulting (collaborative) capacity with a
  university professor or employee?
• If the answer to Question 2 is Yes, treat the
  individual as an independent contractor.

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Part II Section C, Individuals not covered Under
A or B

1. Has the individual provided the same or similar
   services to other unrelated entities or to the
   general public as a trade or business during the
   last 12 months?

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Part II Section C (cont.)

1. Will the department provide the individual with
   specific instructions regarding performance of
   the required work rather than rely on the
   individuals expertise?

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Part II Section C (cont.)

• Can the university set the number of hours and/or
  days of the week that the individual is required
  to work, as opposed to allowing the individual to
  set his/her own work schedule?
• If the answer to Question 2 or 3 is Yes, treat
  the individual as an employee.

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Federally Sponsored Projects

• The individual providing the service to the
  university is required to sign the Terms and
  Conditions for Federally Sponsored Projects
  attesting to his/her acceptance of the provisions
  set forth in the agreement. This signature must
  be obtained before the individual begins the work
  described on the APS form.

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Documents Required for Payment

• Casual Employee
• APS Form or approved PBS document
• Classification Checklist with employee
  determination
• PSEI form
• I-9
• Payment Request Form (NRAs)
• Form 8233 Attachment (NRAs)
• Submit to Payroll on OV7 (Main 134)

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Documents Required for Payment

• Independent Contractor
• APS Form or Approved PBS document
• Classification Checklist with Independent
  Contractor determination
• Submit VP2 with supporting documents (signed APS
  or PBS and checklist) to Independent Contractor
  Desk in the Office of Accounting Main 132 (K5300)

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Payments to Nonresident Aliens

• Note Payments to nonresidents will typically
  require additional steps and paperwork please
  check with the online resources or the Office of
  Accounting before proceeding with payments to
  nonresidents.
• US Sourcing Rules
• SSN/ITIN
• Visa Requirements
• J1
• B1/B2
• WB/WT
• 30 Percent Withholding Requirement
• Tax Treaty Benefits

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Summary of Class Objectives Objective 1

• When is a PBS/APS used as an authorization tool?
• One-time, short-term or sporadic services
• 2 VID
• No special travel (first class, entourage)
  requirements
• No product/property is delivered

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Summary of Class Objectives Objective 1

• When is a formal contract used as an
  authorization tool?
• Fiscal year payments exceed 25,000 or special
  terms (such as first class travel arrangements or
  fee prepayments) are required
• Consulting services (strict state definition) are
  obtained

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Summary of Class Objectives Objective 1

• When is a purchase order used as an authorization
  tool?
• Recurring services, such as maintenance
• Individual service payments are made to a 1 VID
  (company)
• Product is received
• Bidding is required
• When is an HR appointment necessary?
• Recurring services, or a continuous service
  period of two weeks or more.

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Summary of Class ObjectivesObjective 2

• When is an electronic PBS generally required?
• Whenever possible after June 24, 2006.
• When is a paper APS allowed?
• Blanket authorizations for an event with
  multiple individuals receiving fee payments
  and/or travel expenses
• Only direct billed travel expenses are
  authorized.

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Summary of Class ObjectivesObjective 2

• When is a paper APS required?
• 26 contracts grants account is used
• Payment to foreign visitor without an SSN (3 or 4
  VID)
• Taxable Travel is authorized
• Moving expenses or house-hunting trips for newly
  hired faculty
• Spousal/family members travel (e.g., recruiting
  faculty or high-profile speakers).

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Summary of Class Objectives Objective 3

• What are the essential elements required within a
  PBS or an APS?
• Name and address
• UT EID or VID
• Nature of services/description of services
• Qualifications
• Employment status
• Authorization of additional employment for any
  other state agency employee/university employee
• Nepotism statement
• Period of appointment
• Account information

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Summary of Class Objectives Objective 3

• What are the essential elements required within a
  PBS or an APS? (cont.)
• Amount Information
• Requesting Department (on paper form only)
• Form Preparer with phone number (on paper form
  only) or document creator
• and approvals
• Electronic approvals (PBS) or manual signature
  authorizations (APS)

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Summary of Class Objectives Objective 4

• How do I know when a new PBS document must be
  created if changes occur?
• Just add notes for
• Address changes
• Nepotism answer changes
• Total payment amount wont exceed 10 percent of
  the original amount authorized on the PBS
• All other changes must be authorized on a new
  PBS.

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Summary of Class Objectives Objective 4

• How do I know when a new PBS document must be
  created if changes occur? (cont.)
• Add notes to the original PBS to ensure it is no
  longer used
• This document has been cancelled
• See replacement document (include new PBS
  document ID number)
• Also add notes to the new (replacement) PBS
  document
• Replaces original document (include old PBS
  document ID number)

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Summary of Class Objectives Objective 5

• What are the classification criteria used to
  identify an individual as a casual employee or an
  independent contractor?
• Behavioral Control
• How to do the work vs. stating required result
• Control of class materials
• Supervision students, low pay rate, low
  qualifications

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Summary of Class Objectives Objective 5

• What are the classification criteria used to
  identify an individual as a casual employee or an
  independent contractor? (cont.)
• Financial Risk
• Fixed rate or lump sum vs. hourly rate

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Summary of Class Objectives Objective 5

• What are the classification criteria used to
  identify an individual as a casual employee or an
  independent contractor? (cont.)
• Relationship between the parties
• Current, former, or future university employee
  performing similar duties
• The university is the sole customer
• Work involves the universitys core mission
  teaching a course for university credit toward a
  degree program

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Summary of Class Objectives Objective 6

• How does the Employee/Independent Contractor
  Classification Checklist work to determine
  whether an individual will be paid on a VP2 as an
  independent contractor or on an OV7 as a casual
  employee?
• Section I Relationship issues
• Current, past, or future employment
• Section II Relationship issues
• Work involves the universitys core mission
  determined by frequency (four lectures or less)
  or importance (teaching a course for university
  credit toward a degree program)

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Summary of Class Objectives Objective 6

• How does the Employee/Independent Contractor
  Classification Checklist work to determine
  whether an individual will be paid on a VP2 as an
  independent contractor or on an OV7 as a casual
  employee?
• Section II Behavioral Control issues
• The university controls the content of class
  materials used
• Work involves supervisionthe researcher is under
  a university professors supervision or acting as
  a collaborator
• The university is the sole customer, provides
  training, or determines the exact work schedule

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Class Objectives

1. When is a PBS/APS used as an authorization tool?
2. Determine when the PBS is required and when the
   APS is allowed or required
3. Identify the essential elements required within a
   PBS or an APS
4. Know when a new PBS must be created if changes
   occur.

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Class Objectives

• Learn the classification criteria used to
  identify an individual as a a casual employee or
  an independent contractor
• See how the Employee/Independent Contractor
  Classification Checklist works to determine
  whether an individual will be paid on a VP2 or an
  OV7

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Thank you for viewing this presentation

• Call or email anytime with questions. We are
  always happy to assist you!
• Cynthia Roberts, 512-475-7144
• Lori Monson, lorimonson_at_austin.utexas.edu
• User Services Helpline 512-471-8802
• AskUS https//austin-utexas.custhelp.com

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