Independent Contractor Payments

It is crucial that the University of Iowa correctly identifies and pays both employees and independent contractors. The tax laws covering independent contractors are complex. Before determining how to treat payments for services, it is necessary to understand the business relationship that exists between the University of Iowa and the person performing the service. If the individual is not an independent contractor, payment for services through Payroll Services may be more appropriate.

Employers who misclassify workers as independent contractors can face substantial tax bills and penalties imposed by the Internal Revenue Service (IRS) for failing to pay employment taxes and failing to file required tax forms. 

The IRS uses three common law characteristics to determine the relationship between businesses and workers, as explained in IRS Publication 1779 (pdf):

• Behavioral control
• Financial control
• Type of relationship

Payroll Services, guided by IRS and University of Iowa policies and procedures, must examine the entire relationship, consider the extent of the right to direct and control the worker, and weigh all these factors when determining whether a worker is an employee or independent contractor. No single factor stands alone in making this determination and factors relevant in one situation may not be relevant in another. 

Independent Contractor Information Form

NEW in 2025: Payroll Services revised the Independent Contractor Information Form (pdf) and instructions to enhance the intake process. This form now provides more comprehensive information aimed to support accurate classification, ensure compliance, and streamline the hiring and payment processes. 

Departments should complete this form when hiring a service provider requesting independent contractor status and will be paid under their Social Security Number (SSN), or Individual Tax Identification Number (ITIN). This form must be completed by an authorized UI Departmental Representative with the individual that is requesting independent contractor status before the provider is hired to perform their services. 

The completed form should be submitted to Payroll Services to determine if the services qualify as those of an independent contractor or more closely resembles employee-type services. Payroll Services will return the approved form to the initiator within three business days of receipt. In certain circumstances, a Payroll Voucher, or Professional Services Agreement (PSA) may also be required. For more information, refer to Payroll Voucher. 

Next Steps after Independent Contractor Information Form Approval

Services Voucher in the e-Pro System

Use this form when paying an individual:

• Who is paid on their Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). 
• Who has provided a service.
• Who is not employed or associated with the University of Iowa.
• Who is an independent contractor and may also be working under an agreement or a contract. *

If the payment will be $10,000 or more, please refer to the Payroll Voucher information.

* If you sign a contract on behalf of the university for which you do not have signature authority you may be personally liable to the vendor and to the university. Contact your immediate supervisor to determine who should sign the contract on behalf of the university.

Required information:

• Name, address, and SSN or ITIN of the person providing service. (Payments should be made directly to the individual providing the service, not to a third party).
• Payment requests must be made out to the name that belongs to the SSN, ITIN, or Federal Tax ID number.
• Citizenship information.
• Specific information about the service provided.
• IACT in the 6000 series, excluding those for Travel 6025-6064.

For payments processed in the e-Pro System/eVoucher, the following documentation, as applicable, should be attached to the services voucher:

• Approved Independent Contractor Information Form
• Email notification, and/or other forms stating independent contractor determination approval.
• Invoice or similar paperwork identifying services rendered.
• Any other pertinent documentation.
• For new vendors, either the IRS Form W-9 or W-8BEN (for non-U.S. citizens).

Payroll Voucher

The paper Payroll Voucher Form (pdf) will continue to be accepted for the following types of payment requests until further programming is complete:

If the service provider is an individual:

• Who does not have or will not provide a SSN or ITIN.
• Who is a non-U.S. Citizen, and all work is performed outside of the U.S. and will not come to the U.S.
• Who is a non-U.S. Citizen, all work is performed inside the U.S., and the payee enters the U.S. on a B-1/B-2/WB/WT, J-1, F-1 (CPT/OPT) or has an EAD in visa types H4, J2, AOS, etc.
• Who will receive a payment of $10,000 or more.  For payments $20,000 or more, a Professional Services Agreement (PSA) should be used for individuals who are not university employees and who receive payments from the university of $10,000 or more per project year. A Purchase Requisition (PReq) may also be required. For more information about the PSA and the PReq can be found on the Purchasing Office website.

In these instances, use the paper Payroll Voucher form when paying:

• Who has provided a service.
• Who is not employed by or associated with the University of Iowa.
• Who is an independent contractor working under an agreement or a contract. *

* If you sign a contract on behalf of the university for which you do not have signature authority you may be personally liable to the vendor and to the university. Contact your immediate supervisor to determine who should sign the contract on behalf of the university.

Required information:

• Name, address, and SSN or ITIN (if applicable) of the person providing service
  (payments should be made directly to the individual providing the service, not to a third party).
• Citizenship information.
• Specific information about the service provided.
• IACT in the 6000 series, excluding those for Travel 6025-6064.

Payment Processing & Reporting

Independent contractor services are paid through the Accounts Payable department, not through UI Payroll Services.

U.S. citizens and resident aliens do not have federal, state, and FICA taxes withheld, and a W-2 statement of wages and taxes withheld is not issued. If payment for such services exceeds $600 in a calendar year, a 1099-NEC income form is issued for tax purposes. Nonresident aliens will have the required federal tax withheld and a 1042S tax statement will be issued. 

Office Responsibilities

Other Resources:

• Payment Determination Guidelines to U.S. Citizens (pdf) is a document that describes how to identify and manage different types of payments for employees and students who are U.S. Citizens including stipends, scholarships, reimbursements, and employee compensation. (Contact Payroll Services about payments for non-citizens.)
• Employee Self Service  Human Resources Systems/Data & Reports/HR Reports > Employee Information > Appointment History (Recent): To check for employment status.
• Employee Self Service  Business & Financial Systems/Data, Reports, & Dashboards/AP-PO PeopleSoft > Payment Status: To check payment status.
• Employee Self Service  My Self Service/University Information/My HR Rep/Workflow Admin/Dept Admin: To find your designated administrative contacts.
• Purchasing Department for information about the Professional Services Agreement (PSA) for payments of $20,000 or more and the conflict of interest policy and sole source justification.

Contacts:

Stacey Halverson
stacey-halverson@uiowa.edu
319-335-2170
General independent contractor payment questions and form approvals

Jenny Loeser
 jenny-loeser@uiowa.edu
 319-335-0153
General independent contractor payment questions and form approvals

Xuefen Zhen
xuefen-zhen@uiowa.edu
319-353-2460
Payments to non-U.S. citizens or nonresidents of U.S. Territories