Question
: Our Leadership class is hiring a DJ for a dance. The cost is $150 and I don’t believe the person has a business license. Is this allowed? ASB has completed a purchase order and the individual will submit an invoice, but is there anything else we need?Response: When people are paid to assist the ASB, they are compensated either as an employee or as a consultant. The Internal Revenue Service has regulations on when someone may be paid as an employee and when they may be paid as a consultant. Many districts also have board policy and/or procedures on how to determine if someone should be paid as an employee or a consultant. Check with your district’s business office to find out if such regulations exist. Having a business license is not necessarily required for consultants using their social security number as their tax identification unless board policy states otherwise.
When determining whether or not a person should be an independent contractor or an employee of the district/ASB, the Internal Revenue Service (IRS) looks at how the facts in the specific situation illustrate the level of control that the employer has over the specific situation. After considering all of the facts of the case together, the greater the level of control by the employer, the more likely the worker should be classified as an employee.
The following are IRS guidelines for making the distinction between employee and independent contractor. If the answer to any of these questions is yes, then the ASB organization should classify the worker as an employee, with payment being made through the district payroll process.
·
Does the ASB organization provide the worker with instructions on how to do the work? The following are all instances that imply either independent determination by consultant or dependent status of employee:o When and where to do the work
o What tools or equipment to use
o What workers to hire to assist with the work
o Where to purchase supplies and services
o What work must be performed by specified individuals
o What order or sequence to follow
·
Does the ASB organization provide the training for the worker?·
Is the worker’s service a vital part of the ASB operations?·
Is the worker responsible for hiring, supervising, and paying assistants?·
Does the worker perform services for the ASB on a regular and continuous basis?·
Does the worker delegate work to others in the ASB or district?·
Does the ASB organization set the hours of service for the worker?·
Does the worker work full-time for the ASB?·
Is the worker reimbursed for business and travel expenses?·
Does the ASB provide the equipment and tools for the worker?·
Can the worker end the relationship with the ASB without incurring a liability or obligation?If the ASB organization determines that it will pay the worker as an independent contractor/consultant, a W-9 taxpayer identification form must be obtained from the worker prior to their beginning work. These W-9 forms are available from the district business office.
The IRS has many requirements for reporting payments to independent contractors, but as a general rule, ASB organizations are obligated by law to report student body fund payments by issuing Form 1099-MISC to any independent contractor totaling $600 or more in a tax year. Because the district also issues 1099s at the end of the calendar year, it is most efficient for the district business office to issue all 1099s for the ASBs as well, since they are able to retrieve the information from all school sites. The 1099s must include all payments throughout the entire district, not just at one site. The best way to efficiently coordinate that is through the district business office. The ASB provides information on the independent contractors to the district business office, and the business office then issues the 1099s for the ASB independent contractors doing work at all school sites in the district.
The following is a summary of how ASB workers are paid once the ASB has determined that the workers are independent contractors/ consultants versus an employee. Again, you first must know what your district’s rules and regulations are about this determination. Work with your district business office to make sure the below summary is true for your district. Also, remember, that in secondary schools, the costs for ASB workers should be preapproved like all other ASB expenditures.
Independent Contractor Payment Procedures
o The ASB bookkeeper obtains the W-9 Taxpayer Identification form from the independent contractor.
o The contractor submits an invoice to the ASB bookkeeper for payment.
o The principal or ASB advisor signs off on the invoice that the work was completed satisfactorily.
o The ASB bookkeeper pays the invoice.
o The ASB bookkeeper provides the information on the amount paid to the independent contractor to the district business department no later than January.
o The district business department issues a 1099 tax form at year-end to the contractor.
10/28/08
