The University of Chicago does not withhold taxes on Independent Contractor payments reported on form 1099 – MISC.
Except for the following:
- Foreign payments
- Independent Contractors with a B-notice from the IRS
A B-Notice will be issue to the Independent Contractor if he/she failed to provide the correct information on the Request for Taxpayer Identification Number and Certification. Any future payments to the independent contractor with a B-Notice that has not been corrected within the allocated time, will be subject to 28% tax withholding.
Tax Reporting Documents for Independent Contractors – Form 1099 and Form 1042S
Payroll Services is responsible for providing the proper tax reporting forms to individuals paid as independent contractors. Tax documents are not provided to businesses registered with the IRS as corporations, with the exception of corporations providing medical services.
For U.S. citizens and residents performing services, the University will issue a Statement for Recipients of Miscellaneous Income (IRS Form 1099) for tax reporting purposes. Generally, the University will not issue an IRS Form 1099 to independent contractors whose total payments for the calendar year are less than $600. Although the university is not obligated to provide a 1099 tax statement to the IRS, the individual recipient must still report this income to the IRS on his/her tax return.
For nonresident aliens, the University will issue the Foreign Person’s U.S. Source Income Subject to Withholding (IRS Form 1042S). The University will always issue IRS Form 1042S to nonresident aliens, regardless of the dollar amount. Federal tax is withheld from the alien’s earnings at the rate of 30% (or 14% for education-related payments). Aliens may file for tax-exempt status according to the tax treaties between the U.S. and the alien’s country of tax residence.
For University employees who provided additional services to the University, the additional income from the extra service, will be reported (along with the employee’s regular income) on the W-2 Form. Since the additional payment was processed through payroll, taxes were withheld at the appropriate withholding rate: 25% Federal, 3.75% Illinois state, or at another applicable state tax rate. The University is responsible for providing W-2 forms to individuals paid as employees at the end of January.
Tax Reporting for Special Payments Made Through the Independent Contractor System Honoraria, One-Time Lecture Fees, and Human Subject Fees. The preceding three types of payment will be reported to the Internal Revenue Service on IRS Form 1099 – Statement for Recipients of Miscellaneous Income, only if the total payments to the particular recipient (the individual or organization) equal or exceed $600 in a calendar year. Foreign recipients will receive a IRS 1042S Tax reporting document regardless of the amount.
Royalties, Permission Fees, and Prizes and Awards (Post-Doctoral Fellowships)
The preceding three types of payment will always be reported to the Internal Revenue Service, regardless of the amount. U.S. Citizens and Residents will receive the IRS Form 1099, and Non-Resident Aliens will receive the IRS Form 1042S
Receiving Tax Reporting Documents
Tax-reporting documents will be sent to the independent contractor at the address provided on the E-voucher or the (W-8BEN form). The University issues 1099 Forms at the end of January. 1042S Forms are issued during the month of March. If an individual has not received the appropriate tax-reporting document, he/she should write or contact Payroll Services and request that a new document be sent.