Guide to Paying for Consulting Services

Transcription

1 Guide to Paying for Consulting Services Purpose: This guide has been created with the intention to help clarify the documentation requirements for hiring consulting services via independent contractors or organizations. Please note: These are only guidelines as the Purchasing Policy PUR states that additional documentation may be requested, depending on the circumstances, scope of work, dollar amount and other factors. Please refer to for more information. Processing Time: Please allow at least 2 weeks for full Purchasing and Financial Services review of completed documentation. Incomplete documentation will be returned and will need to be resubmitted. Additionally, Purchasing & Financial services may review documentation and request more information before approving. Independent Contractor vs. Employee: There are several factors that are taken into consideration when determining if someone is truly an independent contractor. Tax Services/Financial Services makes this determination based on the information provided in the Independent Contactor Determination Checklist as well as any supplementation information requested. More information can be found here: Section 1: Paying Individuals a) Payments totaling less than $599 b) Payments totaling $600 to $10,000 c) Payments totaling $10,001 to $49,999 d) Payments exceeding $50,000 Section 2: Paying LLC s, Corporations, etc (billed to a EIN/non-individual) a) Payments less than $4,999 b) Payments totaling $5,000 to $49,999 c) Payments to non-individuals; $50,000 or more Section 3: Paying Non-Resident Alien or Other Foreign Entities a) Payments to foreign individuals b) Payments to other foreign entities Section 4: Links to Forms

2 Section 1: Paying Individuals a) Payments to individuals; $599 or less b) Payments to individuals; $600 to $10,000 - Independent Contactor Determination Checklist (approved by Tax Services) c) Payments to individuals; $10,001 to $49,999 - Independent Contactor Determination Checklist (approved by Tax Services) - Agreement for Independent Contractor Consultant Services - Certificate of Insurance (or waiver based on Scope of Work) - Sole Proprietor Workers Compensation Waiver - RX Document generated by BST d) Payments to individuals; over $50,000* *Per PUR : If the expected dollar amount to be paid is $50,000 or more, Purchasing and Business Services must conduct a sealed, competitive bid and execute a formal written contract. Purchasing and Business Services is also required to advertise the solicitation (see PUR , Advertising for Bids ). However, upon review of the documentation provided, Purchasing may waive the competitive bid process. Please allow at least 3 weeks for Purchasing and Financial Services to conduct full review of documentation and grant approval for competitive bid waiver. - All items found in section 1c - Sole Source Justification

3 Section 2 Paying LLC s, Corporations, etc (billed to a EIN/non-individual) a) Payments to non-individuals; $4,999 or less - Invoice b) Payments to non-individuals; $5,000 to $49,999 - RX document generated by BST If payments are made to an individual as an LLC/corporation the Independent Contractor Agreement Form may be required c) Payments to non-individuals; $50,000 or more *Per PUR : If the expected dollar amount to be paid is $50,000 or more, Purchasing and Business Services must conduct a sealed, competitive bid and execute a formal written contract. Purchasing and Business Services is also required to advertise the solicitation (see PUR , Advertising for Bids ). However, upon review of the documentation provided, Purchasing may waive the competitive bid process. Please allow at least 3 weeks for Purchasing and Financial Services to conduct full review of documentation and grant approval for competitive bid waiver. - Agreement for Independent Contractor Consultant Services - Certificate of Insurance (or waiver based on Scope of Work) - Independent Contractor Agreement Form - RX Document generated by BST - Sole Source Justification

4 Section 3: Payments to Non-Resident Alien or Other Foreign Entities The Internal Revenue Service (IRS) requires that all independent contractor payments made to nonresident alien individuals or foreign business entities be made in accordance with IRS regulations. These regulations require that, when services are provided inside the U.S., taxes be withheld from payments made to nonresident aliens (NRAs) or foreign business entities unless the income is exempt under a provision of a tax treaty between the foreign contractor s country and the U.S. Foreign individuals must be eligible to claim a tax treaty exemption by having a social security number (SSN) or individual taxpayer identification number (ITIN) and must have submitted for certification a completed IRS Form Foreign business entities must have an employer identification number (EIN) and must have submitted for certification a completed IRS Form W-8ECI, W-8BEN, W-8EXP, or W-8IMY. Unless the payments made to the NRA are exempt due to tax treaty or are effectively connected with the conduct of a trade or business in the U.S. (payments to foreign business entities only) or are made to a foreign entity with U.S. tax-exempt status, and the appropriate IRS forms have been filed, all payments made to the NRA or foreign business entity will be subject to U.S. federal income tax withholding of 30 percent. Tax regulations also require that taxable payments made to NRAs or foreign business entities be reported annually on IRS Form 1042-S, Foreign Person s U.S. Source Income Subject to Withholding. A copy of the form is sent to the foreign individual or entity at the time it is filed with the IRS. The IRS requires that Form 1042-S be filed by March 15 following the calendar year in which payments were made. a) Payments to foreign individuals If work is done within the US, the following forms & information are required: - W8-BEN - Alien Data Collection Form - USCIS Form I-20 or DS-2019 (formerly Form IAP-66), whichever is applicable - USCIS Form I-94, Arrival-Departure Record Form (I-94 is issued to the foreign national on arrival in the U.S. and is attached to the passport) - The foreign national s passport picture page - The foreign national s U.S. visa sticker with his or her photo b) Payments made to other foreign entities If work is done outside the US, the following forms & information are required: - W8-BEN - Scope of work including specific language stating the total dollar amount to be paid & specific language stating all work will be performed outside the US See FIN for additional information: Financial Services has published a Foreign Visitor Tax Guide:

5 Section 4: Links to Forms Sub W-9: DPSO: ICDC: Agreement for Independent Contractor Consultant Services: Justification for Sole Source Purchase: Sole Proprietor Workers Compensation Waiver: Independent Contractor Agreement Form: W8-BEN: Alien Data Collection Form: Other form: &