Independent Contractor versus Employee Status Determination

Scope

All Indiana University units and employees.

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Policy Statement

In accordance with the Internal Revenue Service and US Department of Labor, individuals providing services to the university are presumed to be employees unless they meet all independent contractor criteria outlined in this policy. This policy does not govern independent contractor agreements that employees may have with external parties outside of Indiana University. Refer to UA-17, Conflicts of Interest and Commitment policy for agreements with external parties.

All independent contractors who are not U.S. citizens must receive verification of (a) work authorization status and (b) tax treaty status, prior to employment or IU acceptance of a contract for services.

External individuals engaged to perform services for the university who do not meet the criteria below are required to be paid through the university payroll system. In order for an individual to be compensated as an independent contractor, the following five (5) criteria must all be met:

1. The university does not control how the task is performed.

2. The task is outside the university’s core functions (teaching, research, public service).

3. The individual operates an independent business and serves other clients.

4. The task is short-term (≤180 days).

5.  Services and terms of the arrangement are documented per IU Accounting Standard (UCO-TAX-4.01 Independent Contractor: Determination of Employee or Independent Contractor Status).

Exceptions to Policy: Exceptions to the above may be considered via the independent contractor questionnaire (ICQ) with approval from the unit’s Vice President, Provost, Chancellor, or designee. This approval is required to be included with the ICQ submission. UCO (Office of the University Controller) Tax will analyze the ICQ in conjunction with General Counsel and determine the appropriate payment method. 

To assure adherence with Indiana Code 4-2-10-10.5 and 35-44-1-1.4, all University employees who are providing services outside of their regular job duties must be paid as employees through the regular university payroll process. 

An ICQ is still required to be submitted for any individual paid within the last 365 days as a former IU employee, even if all 5 criteria are met above. 

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Reason for Policy

To assist departments in making a determination of whether payments made to individuals for services performed for the University should be paid and reported as employee wages, or as compensation to an independent contractor.

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Procedures

All independent contractors must provide the University with a signed copy of IRS Form W-9, Request for Certification of Federal Taxpayer Identification Number, or equivalent, in order for any payments to be processed.Tax information is collected via the University’s procure-to-pay system.

The university will issue an IRS 1099 series form if total payments for compensation paid to the contractor meet or exceed the IRS established threshold annually in the calendar year. 

The following examples are given to provide additional guidance regarding workers who might meet the criteria for independent contractor status include:

• Guest performers or artists not affiliated with the university.
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• Guest speakers with short-term engagements.
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• Professionals (e.g. attorneys, accountants, photographers, etc.) who serve other clients.

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Additional Contacts

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History

The source to this policy is:

Internal Revenue Code and Regulations, Fair Labor Standards Act, Indiana Code

This policy was formally FIN-PAY-IV-220 under the “Payroll Administration” subcategory and has been renumbered and relocated under the “Accounting Administration” subcategory as of May 13, 2016 to accurately reflect where this policy should reside. As well, the policy contact information has been updated to reflect this policy relocation.

September 2025- Substantive revisions

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