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Independent Contractor Payment Guide

This guide provides general information about the process used to pay an individual or organization providing personal or professional services to a campus customer.

The services of an independent contractor are procured through either a UCSC business agreement or purchase order depending on the nature of the work arrangement. More information about this is available from Procurement Services.

Independent contractor services are provided by a vendor when the University has the right to control the result of the vendor’s service. Consultant services are provided by a vendor when the University has neither the right to control the result of the vendor’s service nor control the way in which the service is provided. For these situations, refer to the Consultant Payment Guide for more information. In situations involving a vendor providing service as an individual, where the University controls both the result of the vendor’s service and the way in which the service is provided, the individual is to be paid as an employee.

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  • Before you start

    Important information to know:

    1. Special conditions: Be aware of the following special conditions applying to this type of transaction.
      • Securing the services of an independent contractor requires either the issuance of a purchase order or, in certain situations, the execution of a business contract.
    2. Avoid conflicts of interest: Refer to the appendices for information covering employee-vendor conflict of interest issues.
    3. Tax information: Payments may only be made to recipients with a Social Security Number or an Individual Taxpayer Identification Number (ITIN). Use IRS Form W-7 Application for IRS Individual Taxpayer Identification Number to apply for an ITIN number.
    4. Payment: If this is the first time the recipient will be receiving a UCSC non-payroll payment, complete a Payee_Setup_204 form.

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  • Ways to pay

    This type of expense must be procured using CruzBuy. For more information about CruzBuy and the purchase order process, see Procurement Resources.

    • A direct payment cannot be made to the vendor.
    • The Campus Purchasing Card cannot be used to procure this good or service.
    • Out-of-pocket payment for this type of good or service will not be reimbursed.

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  • Reimbursement of travel expenses

    Reasonable, properly substantiated travel expenses incurred by independent contractors or consultants are expected to be included as part of the pre-negotiated fee for services covered under a UCSC purchase order contract.

    • Buyers should note in the PO text that the consultant/independent contractor's fee includes travel costs, or if
    • Travel will be billed to UCSC as a separate line item. Buyers should determine the maximum to be reimbursed and set up a separate line item for travel costs on the purchase order

    Reportable 1099 travel:

    • The vendor's invoice should include original required itemized receipts. Receipted travel costs are treated as reimbursements and are not subject to 1099 reporting
    • Unsubstantiated expenses (required receipts not included with billing) are treated as income and hence are subject to 1099 reporting

    Refer to the UC Business and Finance Bulletin G-28, p. 40, Section XI.B.3 “Special Travel Situations – Independent Contractors and Consultants” for additional details.

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  • Receipt and documentation requirements

    The original vendor invoice must be submitted in order for a payment to be made to the vendor.

    • The invoice must indicate the location where the contracted service was performed.
    • Email the FAST/AP Office at authorizing payment when the original purchase order amount is exceeded by $100.00 to $499.99.
    • Submit a change order request through CruzBuy for payments of $500.00 or more over the original purchase order amount.

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  • Authorizations and approvals

    A business contract to secure the services of an independent contractor may only be signed by the following individuals:

    • Chancellor
    • Executive Vice Chancellor
    • Vice Chancellors
    • Assistant Chancellor
    • Director, Materiel Management, or authorized designee

    Vendor Invoice: A payment on an invoice associated with a purchase order coded with a “UCSC42” in the commodity description field must be reviewed and signed by an authorized departmental or divisional employee prior to its submission to the Financial Administrative Services and Transaction Office (FAST/AP) for payment.

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  • Common oversights

    Speed up getting a payment processed by avoiding these common oversights:

    • Forgetting to provide the recipient’s social security number or individual taxpayer identification number.
    • Forgetting to request a change order from the Purchasing Office when the amount to be paid will exceed the amount allowed on the Purchase Order.
    • Forgetting to submit a Payee Setup 204 form for a first-time reimbursement or payment recipient.

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  • Policy references

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  • Where to get help

    Assistance is available for the following topics:

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  • Relevant Appendices

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