Independent Contractor Instructions


The crucial question is whether the proposed vendor is an “Independent Contractor” under the law. If he/she is not an Independent Contractor, payment for the services by payroll or MITemps may be more appropriate.

Special Processing Requirements

Your requisition and Independent Contractor information will be reviewed to determine whether it appears to describe a Contract for external services by an Independent Contractor, or more closely resembles a request for employee-type payroll services. The IRS, in order to ensure the collection of all employer required taxes (i.e. employer matching social security and medicare; unemployment taxes; worker’s compensation; and general withholdings) and to ensure that individuals are not taken advantage of by being hired as independent contractors without benefits, as opposed to as employees with benefits, has developed several factors to determine whether an individual may be hired as an Independent Contractor or should be hired as an employee. Substantial fines and criminal penalties exist to penalize hiring entities who classify individuals as Independent Contractors when they are actually de facto employees. It is, therefore, important to be sure that the correct classification is made.

CLASSIFICATION CRITERIA (Not Applicable for a Business with an Assigned Federal Employer I.D. #)

In accordance with the IRS guidelines implemented by MIT, in order to qualify as a bona-fide Independent Contractor Contract, the services to be obtained must meet the following criteria:

1. The person must have a history of offering and performing similar services for the general public (other organizations), and being paid for such work as an Independent Contractor (not as an employee).

2. The person must not be a student at MIT and must NOT be a current employee of MIT in any capacity.

MIT undergraduate and graduate students should not be paid as independent contractors for part time employment.

Undergraduate students should be hired as hourly paid students using the electronic Student Personnel Action Form (eSPAF), and must complete electronic timecards on WebSIS. Student Financial Services offers instructions for using the eSPAF. http://web.mit.edu/sfs/jobs/espaf_instructions.html Please consult with your unit Administrative Officer or contact Gary Ryan in the Student Employment Office at 8-5608 for assistance.

A graduate student who is a US citizen or permanent resident who applies to work, in addition to his or her RA or TA appointment, may be permitted additional compensated employment at MIT for no more than 10 hours per week during the academic year. Graduate students can also be paid on an hourly basis using the eSPAF and WebSIS, in additional to the primary appointment processed through WebGradAid. Please consult with your unit Administrative Officer or contact Mathew O'Toole in the Graduate Students Office at 3-9464 for assistance.

3. If the person is a former employee or student, the person must meet the general requirements for classification as an Independent Contractor and may not return to perform the same work performed while associated with MIT.

4. The person should possess knowledge and special abilities not generally available within MIT and the services to be provided should not be comparable to those performed by other employees of MIT. [The person’s services should NOT be a key aspect of the regular business of MIT or the specific department.]

5. The person should not supervise or be directly supervised by MIT employees. (i.e. controlling how or when the work is done; collaborating is not supervising)

6. The person should generally not be assigned office space or require administrative services provided by MIT.

7. The services to be provided should be project-driven, generally provided on an intermittent basis as required or over a short term. With few exceptions, individuals providing services on a steady, full time or near full time basis for an extended period are considered employees by the IRS notwithstanding any consulting contract which may be in effect.

With the exception of #1 and #2 above, failure to satisfy one or more of the criteria does not necessarily mandate a negative determination. The final decision is based upon an overall weighing of these and other pertinent factors.

EXCEPTIONS

1. The vendors included on the following list will not typically be required to fill out Independent Contractor paperwork because of the minimal risk to the Institute that individuals engaging in activities in these fields on a LIMITED basis would be determined by the IRS to be employees:

referees, umpires, musicians, singers, dancers, D.J.’s, painters, sculptors, comedians, clowns, and other similar entertainers doing work on a limited basis.

2. Foreign citizens doing work entirely in a foreign country will not be required to submit Independent Contractor paperwork because there are no United States tax implications.

3. As indicated above, the Independent Contractor laws are not applicable to companies with assigned Employer Identification Numbers, therefore, no Independent Contractor paperwork is required in these instances.

IMPORTANT REMINDER

Independent Contractors must be reapproved every two years to ensure that they are still truly functioning as an independent contractor and not as an employee. Therefore, completed and updated Independent Contractor paperwork must be submitted every two years.

PROCEDURE (All of the following should be completed PRIOR to the start of the Contractor’s work)

1. Obtain a Proposal (letter) from the Independent Contractor which provides a complete description of the services to be provided, description of deliverables, the period of performance, the agreed-upon Costs /Pay Rate, and an estimate of the Total Cost of services.

2. Obtain: A) a letter from the Independent Contractor which provides evidence that he/she regularly offers the requested services to the general public (i.e., a listing of other clients and dates worked) and a statement that he/she was “paid for such work as an ‘Independent Contractor’ [not as an employee]” *; and B) a copy of the Independent Contractor’s current résumé.

* If the Independent Contractor has not previously offered his/her services to the general public, obtain a letter from the Independent Contractor stating that it is his/her intention to offer these services to the general public.

* Note: Every TWO years the Independent Contractor must be re-evaluated for Independent Contractor status.

3. Form 4.15A, entitled “MIT Independent Contractor Information”, must be completed by the requisitioner or the department contact (not the Independent Contractor). This form is available on the Procurement website.

4. Provide a Selection of Source and basis for Acceptance of Costs form if the work is for over $10,000. This form is also available on the Procurement website.

5. If the Independent Contractor’s proposal does not clearly and thoroughly explain the statement of work and deliverables. Provide a memo that gives a thorough explanation/ description of the Statement of Work and Deliverable Items (Tangible) or Reports.