Is your department considering the use of contract labor (an independent contractor)? Should this individual be paid as an employee instead?
What difference does it make? If a worker is classified as an employee Oakland University is responsible for:
- the withholding and timely remittance of Federal and State income taxes in addition to FICA taxes
- the timely remittance of the Univesity's share of FICA,and the unemployment insurance on employee wages
- the annual reporting of wages paid on Federal Form W-2 Wage and Tax Statement (independent contractors who meet reporting requirements receive a Form 1099-MISC Miscellaneous Income)
Whether a worker is an employee or an independent contractor hinges on the level of direction and control which the University has the right to exercise.
All departments must forward an Employee Versus Independent.xls to the Tax Compliance section of the Controller's Office for review and proper classification before entering into a personal services agreement. For determination, complete and E-mail the checklist to the Tax Compliance section of the Controller's Office: lieberge@oakland.edu.
Do not use the checklist for services from a corporation, partnership, or limited liability company that uses an employer identification number (EIN) for tax purposes. The checklist is only required for payments to individuals and sole proprietors.