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Independent Contractors

An independent contractor is an individual or sole proprietor who is contracted to perform work for the university utilizing their own methods, and the means by which the work is accomplished is not controlled by Carnegie Mellon University. An independent contractor is normally engaged in an established business, trade or profession. As such, an independent contractor is not an employee of Carnegie Mellon and is treated differently with respect to tax withholdings, employee benefits and payment methods.

Mistakenly classifying an employee as an independent contractor can result in significant fines and penalties. The IRS continues to seek out and impose penalties on organizations that treat employees as independent contractors and fail to withhold taxes. As a result, the IRS considers 20 factors in determining a worker's status. Meeting just one of the conditions may qualify that worker as an employee; however, the 20 factors are used as guidelines to determine whether sufficient control is present to establish an employer-employee relationship. Not every factor is applicable in every situation and the degree of importance of each factor depends on the type of work and individual facts and circumstances. All relevant factors are considered in making a determination and no one factor is decisive.

Carnegie Mellon University uses an independent contractor checklist to assist schools and departments in determining whether individuals performing services should be hired as an employee or an independent contractor.

If the determination is an independent contractor, please refer to the Guide to Supplier Forms. All the necessary steps for determining and procuring the services of an independent contractor should be completed before any services are performed.

If you need assistance of have any questions regarding the Checklist or determination of independent contractors vs. employees, please contact the the Tax Department directly.

What is the difference between an independent contractor and an employee?

An independent contractor is an individual or sole proprietor who is going to perform work for the university utilizing their own methods, whose work is not controlled by Carnegie Mellon University and who are normally engaged in an established business, trade or profession. An employee is an individual who performs services for the university and the university has control over the details of what and how it will be done. An independent contractor is not an employee of Carnegie Mellon and is treated differently with respect to tax withholdings, employee benefits and payment methods.

What should the department do if they are not sure whether an individual is considered an independent contractor or employee?

The department that is interested in an individual performing a service for Carnegie Mellon should complete the independent contractor checklist and answer the questions based on the individuals facts and circumstances and type of work. If the department needs assistance with the completion of the Checklist, it should contact the Taxation Department.

What is the process for hiring independent contractors?

Department is interested in an individual performing services at Carnegie Mellon.
The department will complete the independent contractor checklist, providing the necessary information and answering the questions regarding the individual who will potentially provide services to Carnegie Mellon.
The completed checklist will be submitted via email to the Taxation Department for review. Additional information may be requested by Taxation.
Taxation will provide department with results of review - approval (signature on the checklist) or not (hiring of an employee).
If approved, Taxation will return the form to the department in order for them to continue with the independent contractor process by contacting the University Contracts Office, having the independent contractor complete the necessary supplier forms, etc.

What if I forget to complete the Checklist and contact the University Contracts Office instead?

The UCO will provide an email reminder asking you if you have completed the Checklist and received approval from Taxation.

What is the purpose of the Independent Contractor Checklist?

The purpose of an independent contractor checklist is a tool designed to assist Carnegie Mellon's schools and departments in determining whether an individual performing service should be an employee or an independent contractor.

Who should complete the Independent Contractor Checklist?

The university department/buyer that is engaging with the individual or sole proprietor.

Does the Independent Contractor need to sign the Checklist?

No; the Checklist should be completed and signed by the university representative.

Where does the completed Independent Contractor Checklist get sent for approval?

The completed Checklist should be submitted to the Taxation Department for review and approval.

What is the average turn-around time for approval of the Checklist?

The Checklists are reviewed by Taxation on a daily basis and departments should allow for at least a 1-2 day turnaround.

Can the Checklist be emailed?

Yes; it is preferred that the Checklist be emailed to the Taxation Department:

Courtney Davies (x8-5322 or cedavies@andrew.cmu.edu)

What do I do with the Checklist once it has been approved by Taxation and returned to the department?

Once the Checklist is returned to the department, approved and signed off by Taxation, the Checklist must be included in the Supplier Information Package that is sent to Accounts Payable. The Checklist will then be a part of the Supplier record.

Does an individual need to complete the Checklist every time work is being performed by the same independent contractor?

No; a Checklist would only need to be completed for the same independent contractor if the scope or type of work that is being performed has changed.

Is there any particular question on the Checklist that causes an individual to be considered an employee vs. independent contractor or vice versa?

The IRS establishes 20 factors as guidelines in determining a worker's status. Not all 20 factors are applicable in every situation and the degree of importance of each factor depends on the type of work and specific facts and circumstances. All relevant factors are considered in making a determination and no one factor is decisive.

What is the effective date of the revised Checklist and process?

The revised Checklist and process will begin May 1, 2012, with complete transition by July 1, 2012.

Taxation

Finance Division Forms

helpful resources

Independent Contractor Checklist

Independent Contractor Guidelines

Independent Contractors-Taxation - Carnegie Mellon University

Carnegie Mellon University

Independent Contractors

What is the difference between an independent contractor and an employee?

What should the department do if they are not sure whether an individual is considered an independent contractor or employee?

What is the process for hiring independent contractors?

What if I forget to complete the Checklist and contact the University Contracts Office instead?

What is the purpose of the Independent Contractor Checklist?

Who should complete the Independent Contractor Checklist?

Does the Independent Contractor need to sign the Checklist?

Where does the completed Independent Contractor Checklist get sent for approval?

What is the average turn-around time for approval of the Checklist?

Can the Checklist be emailed?

What do I do with the Checklist once it has been approved by Taxation and returned to the department?

Does an individual need to complete the Checklist every time work is being performed by the same independent contractor?

Is there any particular question on the Checklist that causes an individual to be considered an employee vs. independent contractor or vice versa?

What is the effective date of the revised Checklist and process?

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