Steps for Processing an Independent Contractor Payment

The following steps will start the approval process for services to be rendered and paid by the University. Please note the "Name" field and "Tax Identification Number" (SSN, TIN, ITIN, or EIN) field MUST be the same on all forms submitted for payment.  

 

 

  • Step 1: Fill out a Form W-9 (First-time vendors only), or Form W-8BEN for foreign vendors.
  • Step 2: Complete and attach the Independent Contractor Determination Form 
  • Step 3: Attach the contract/PSA .xlsx.pdf. ALL payments for services MUST have a written quote/agreement/contract/ that includes a scope of work if the contract sum will be $500 or more. You may have a separate contract or you may complete the Professional and Personal Services Agreement (PSA). The PSA document is USM's internal personal services contract template. In most cases, a PSA will still be needed for payment processing when a separate contract is in place. Please use the following PSA When a Separate Contract Exists:  .xlsx, .pdf
  • Step 4: Fill out a New Vendor Form (First-time vendors only)
  • Step 5: For payments of $500 or more, send all completed and applicable forms from the above steps (step 1-4) to the Budget Office through interdepartmental mail Attention: Cheri Waldrup (Box no. 5119) or through email at cheri.waldrup@usm.edu for approval by the Tax Compliance Officer, and go to Step 7.
  • Step 6: For an Independent Contractor payment under $500, complete a Remittance Voucher and send all completed and applicable forms from the above steps (step 1-4) to Accounts Payable through interdepartmental mail (Box no. 5104)
  • Step 7: For an Independent Contractor payment over $500, submit a Requisition Request through SOARFIN to Purchasing.

 

 

Important Processing Information:

 

  • I.R.C. Section 1441 (c) (1) The federal withholding exemption for effectively connected income does not apply to the personal services income of a Nonresident Alien. As such, a 30% federal tax withholding rate would apply.

 

  • All service payments MUST include a signed contract (PSA/other), Independent Contractor Determination Form, and the scope of services provided if the payment is $500 or more. The payment request will not be approved by the Tax Compliance Officer without these documents.

 

  • The originating department should maintain a copy of all documents associated with an independent contractor payment request. If payment is $500 or more, a Requisition must be submitted before work commences to create a Purchase Order. Upon completion of services (or for each partial payment), the originating department should acknowledge performance and forward original travel receipts, contractor's signed invoice, and other documentation to Accounts Payable in Procurement Services for payment. The department should also notate on the Remittance Voucher or Purchase Order that the original completed Professional and Personal Services Contract is in Purchasing.

 

Refer to The IRS Guidelines for Determining Worker Status  for specific procedures on determining employee versus independent contract status.

 


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