OVERVIEW Classification of Services

 Purpose

This web site is provided to clarify the distinction between an employee and an independent contractor. The legal difference between the two relationships is often blurred, confusing, or misleading. The Determining Classification and Useful Links sections of this site provide information and tests to assist in classifying workers correctly. After the status determination is made, the Tax Information section provides information about the taxation of independent contractors.

In recent years, the Internal Revenue Service has been scrutinizing employment relationships and the associated tax reporting. Misclassification of this relationship can result in significant tax penalties.

Employers must withhold income, Social Security, and Medicare taxes from the wages of employees and pay associated employment taxes. Services purchased from an independent contractor are not subject to employment taxes.

The University of Missouri is committed to complying with all applicable tax and labor laws relevant to this issue.

Definitions

• Employee
  If the University controls what work an individual does and how that work is done, then an employer-employee relationship exists. It does not matter what the relationship is called, how payments are measured or paid, or if the employee works full time or part time.
• Independent Contractor
  An independent contractor or consultant works as a self-employed person and provides a service to the University. The contractor may be directed as to the results of a service but is usually responsible for determining the means and details of the service.