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.
Earnings of a person who is working as an independent contractor are subject to self-employment tax.
People such as doctors, lawyers, accountants, guest speakers, consultants who are in an independent trade, business or profession in which they offer their services to the general public are generally independent contractors. However, depending on the facts and circumstances of each case determines whether these people are independent contractors or employees.
We hire many independent contractors throughout the year here at UNCW. To learn about the process for hiring an independent contractor please see Purchasing for instructions and forms.
For further assistance in determining if someone is an independent contractor or employee contact the Tax Compliance Department before you hire the person to provide services to UNCW.
The Tax Compliance Department provides the University with tax planning, guidance, compliance, interpretation, reporting and training in all related areas of taxes.
The University of North Carolina Wilmington often pays individuals for services rendered who are not their employees. UNCW is required by the IRS to provide informational returns, a 1099 form, to these vendors and individuals that have received payments for any of the following:
Generally payments to corporations are not reportable but you will need to refer to the IRS instructions for 1099's.
CAUTION: DO NOT automatically treat a payee as a corporation simply because the payee's name ends with "LLC", "Company" or "Co."
1099's are due to the recipients by January 31st. However, the IRS has the discretion to change the due dates each year so it is always good to refer back to the instructions for 1099's provided by the IRS.
The information is also provided to the IRS and is typically due by February 28th; this date can also change so always refer to the instructions for form 1099 for all due dates and deadlines. The time interval between the two filing dates provides additional time to resolve any questions by recipients before filing with the IRS.
When doing business with individuals or companies that may require 1099 reporting at year end, it is always important to get all proper information up front before any services are rendered.
This is highly recommended by the IRS and is just a "good business practice". The following is a list of things that you will need to know about your vendor for 1099 reporting:
The above information is typically obtained by having the vendor fill out a W-9 form, also known as a Request for Taxpayer Identification Number and Certification. This form can be obtained from the AP Office or the Tax Compliance Office.
If a vendor fails to provide an identification number, then UNCW will be required to withhold 24% and pay it over to the IRS. This is called "backup withholding tax" and if UNCW doesn't backup withhold if necessary, then the university will be liable for this tax.