What is an Independent Contractor?
- An independent contractor is an individual who is not treated as an employee of the College, based on conditions established by the IRS.
- As such, the individual is paid through that accounts payable and not the payroll system, is not entitled to employee benefits, is not covered by workers' compensation, and their pay is usually not subject to income tax withholding.
- An independent contractor runs his or her own business, separate from the College, as a single member LLC, individual, or sole proprietor. They typically have a separate workplace, are not managed by Dartmouth employees, and may have a particular set of skills not available elsewhere within the College. Independent contractors are sometimes called consultants, freelancers, self-employed, individuals, sole proprietors and even entrepreneurs or business owners. An independent contract is not an employee of the College.
Independent Contractors Policy at Dartmouth
- It is the College's policy that individuals will be considered independent contractors
if they meet the IRS criteria for classifying an individual as an independent contractor:
- The worker has a principal place of business other than the College premises.
- The worker is free from control over the way he/she works both as to the final results and the details of when, where, and how the work is to be done.
- The worker makes his or her services available to the general public and such services are the worker's recognized trade or profession.
- The worker bears the risk of profit or loss.
- The worker is not an employee of Dartmouth College performing services that are related to their regular work assignment.
- Although most workers can be properly classified based on the above prerequisites, there are some situations in which all of these conditions are not met, or the correct classification is not readily apparent. In these cases it will be necessary to further review the nature of the arrangement. This review involves evaluating many different aspects of both the worker and the work to be performed, which when taken as a whole, will determine the correct classification of the worker.
- All Dartmouth representatives involved in retaining services for the benefit of the College are responsible for ensuring that there is a reasonable basis for the classification, before services are rendered, and are encouraged to contact Procurement Services with specific questions.
- The penalties for incorrectly classifying employees as independent contractors are significant If the IRS reclassifies the individual as an employee, the College will be liable for the amount of the federal income taxes it failed to withhold, together with both the employer's and employee's share of FICA taxes associated with that employee's compensation.
- The hiring of outside legal counsel for any College assignment, e.g., professional advice, lobbying, court appearances, litigation, etc., must be approved in advance by the Office of General Counsel.
- Full-time, salaried employees of the College who may be asked to consult for other College departments are not entitled to receive additional compensation for performing such services when those extra duties fall within their area of professional expertise. This is true even when the work is conducted during outside of normal business hours. Such assignments are considered part of the job for which the employee is already compensated.
- College employees who incorporate, and who in turn provide services to the College that are related to their primary job assignment, will not be classified as independent contractors solely because they have incorporated.
- In the case of contractors who perform services funded from a sponsored project account, departments must also comply with any limitations imposed by the sponsoring agency on either the rate that may be paid to consultants or the amount of travel and related expense reimbursement. It is advisable to discuss each situation with the Office of Sponsored Projects and to carefully review the sponsor's program literature when preparing a grant proposal or hiring a contractor or consultant.
Before services are rendered submit the completed Independent Consultant/Independent Contractor Service Agreement to your Finance Center via the Purchase Request eForm (not to be confused with the Payment Request eForm, which is to be used to process invoices, once received).
- The Independent Consultant/Independent Contractor Service Agreement is a form document that is available online.
- The Purchase Request eForm is available online.
- The completed Independent Consultant/Independent Contractor Service Agreement will be reviewed by the Finance Center as well as Procurement Services. Additional information may be required during this process.
- Procurement Services will make the final decision and inform the submitter via email.
- If the approved Independent Consultant/Independent Contractor is not an existing Dartmouth supplier, we will need completed IRS tax withholding forms. If the individual is a U.S. citizen or U.S. Resident, a W-9 is needed (IRS Revision 2017 or newer, older versions of the form are not accepted). If the individual is a foreign national, a W-8BEN is needed. The name on the W-9/W-8BEN must match the name provided on the Independent Consultant/Independent Contractor Service Agreement.
- If the Independent Consultant/Independent Contractor is working outside of the U.S., the International Staffing Questionnaire must be completed and approved by the Controller’s Office.
- Once the Agreement is approved and work has been performed, the Independent Consultant/Independent Contractor should submit invoices to Dartmouth. Invoices are processed via the Payment Request eForm.
As with everything, there are always unique circumstances that may require a discussion. Please address questions to Procurement.