Independent Contractor Information

Tax Services provides contractors with IRS guidance and considerations.

Arizona State University utilized independent contractors for various purposes. If a contractor is an individual or operating as a single-member LLC, ASU provides guidance to determine the appropriate treatment.                                                              

ASU must follow specific procedures to comply with U.S. tax and labor laws. Tax Services should approve independent contractor treatment before their work begins. Contact your Human Resources partner or Tax Services with questions or for more information.

ASU’s control over the work and economic aspects is key in determining whether to classify someone as an independent contractor or an employee. While each case varies, there are several factors that Tax Services uses to review the relationship. The list below is not comprehensive.

• Expense reimbursements.
  • Expense reimbursements typically indicate an employee-employer relationship, but covering travel costs for guest lecturers is customary. ASU reimbursing certain expenses does not invalidate independent contractor status; however, reimbursing an individual paid hourly makes it difficult to justify this classification.
• Fees.
  • Hourly, weekly or monthly fees may indicate an employee-employer relationship.
  • A fixed fee indicates an independent contractor relationship; use it when possible.
• Financial reliance on ASU.
  • Greater financial dependence on ASU suggests an employee-employer relationship.
  • Independent contractors must actively seek other business opportunities, such as advertising, location maintenance, and serving multiple clients.
• Instructions on when or where work is performed.
  • Detailed instructions on when and where work is performed suggest an employee relationship, while flexibility supports independent contractor status.
• Opportunity for profit or loss.
  • An independent contractor relationship is supported when an individual assumes profit or loss risk, such as earning a flat fee for a project and benefiting from efficient time management.
• Project evaluation.
  • Assessing how the work is performed may suggest an employee relationship while focusing on the result aligns with independent contractor status.
• Purchasing supplies or services.
  • Requiring specific vendors or assistants suggests an employee relationship, while independent contractors are free to choose vendors and subcontractors.
• Significant investment.
  • Greater investment in equipment and supplies indicates independent contractor status.
• Training.
  • Detailed or mandatory training, including adherence to Institutional Research Board protocols, suggests an employee relationship, while minimal or as-needed training supports independent contractor status.
• Using tools or equipment.
  • Requiring the use of ASU equipment or labs suggests an employee relationship while allowing freedom to choose equipment and location supports independent contractor status.

Once a department believes its situation should be reviewed for approval as an independent contractor relationship, it must complete the Independent Contractor Determination Checklist form before completing any work. 

The form routes automatically based on the email addresses provided. Each recipient is responsible for reviewing and completing their designated section, and additional attachments can be added for clarification. Once approved, the checklist will be emailed to all recipients and should be attached to any requisitions related to the approved services.

ASU also recognizes some situations in which this approval should be automatic. Exceptions to the determination checklist requirement include:

• Athletic officials.
• Board members.
• Corporations, partnerships or other business entities not operating as a single-member LLC.
• Expense reimbursement only — no service or honorarium payment is included.
• Guest lecturers and speakers visiting for fewer than two weeks. 
• Individuals performing external peer review consulting services as part of departmental or program accreditation or performance monitoring.
• Payments to a service provider that will not exceed $600 across the university in a calendar year.
  Performers giving a limited number of performances, including DJs and artists.
• Photographers and short-term, project-based videographers.
• Service providers for construction or tenant improvement.
• Service providers for tangible goods or equipment rentals.
• Standardized patients.
• Writers — if the payment is for an article published in an ASU publication or website.

Tax Services will provide the following steps if the form is denied, or additional information is needed. A denial will require the department to work with HR to hire the individual as an employee.

The following types of services will not be approved for independent contractor treatment, with a few exceptions:

• Instructors of record or those teaching accredited courses for all or most of the term.
• Long-term or full-time research assistants.
• Services by any individual or company that an ASU employee owns. This would constitute a conflict of interest and would have to follow ACD 204-08. Some company services may be provided; however, disclosure and review are required by ASU’s Office of Research Compliance or the Office of General Counsel. 
• Transitional positions for incoming or leaving employees, including positions that ended after graduation. Refer to FIN 421-01 for more information.

• ARS 38-503 Conflict of interest; exemptions; employment prohibition.
• ASU Office of General Counsel: Conflict of Interest.
• ASU Office of Research Compliance: Conflict of Interest.
• FIN 421–01.
• Internal Revenue Service: Independent contractor (self-employed) or employee.