The Daily Bulletin Archive

The Buffalo State College Foundation Accounting Office frequently receives requests for payment of services to individuals. Payment for services to individuals usually falls into one of two categories: independent contractor or employee. Payments are usually made to independent contractors in a lump sum (sometimes referred to as a stipend), while employees are placed on the foundation payroll. Independent contractors will usually receive a 1099 at the end of the year, while employees receive W-2s. The IRS sets the standards for these categories, which can be very detailed and complicated based on conditions and services provided. 

As a very brief partial summary, an independent contractor is usually independent of the hiring organization and does not perform an ordinary essential business function of the organization. Independent contractors generally have a recognized business profession that is generally provided and advertised to more than one hiring organization. Some examples of business professions include CPA’s, lawyers, plumbers, electricians, lecturers, and speakers. Independent contractors are generally paid for the job performed and not by time increments. Independent contractors are not supervised, nor has the method by which their services are provided been directed by the hiring organization. They can usually perform the work at the location most convenient to them. Students, faculty, and staff are generally not considered independent contractors.

Misclassification of independent contractors can be extremely costly to program directors. Employees are entitled to receive mandatory benefits. Our office requests that if there is any question as to whether an individual falls into an independent contractor or an employee category that our office be notified before any work begins. If an individual falls into the employee category, we will need to be provided with appropriate tax information before work begins to ensure that the individual is authorized to work within the United States.

In summary, we can pay for services performed by individuals. We must, however, make every effort to ensure that the individual is classified correctly as either an independent contractor or an employee.