1099 Misc Template Doc Certified Approvers Continuing Education Payments to Individuals December 16 by hdc31226

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									    Certified Approvers
    Continuing Education

    Payments to Individuals

    December 16, 2004   1:00 – 3:00pm



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I.           Overview of Discussion


 A. Overview
 B. Documents/Theories Covered
 C. Purpose of Training




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  A. Overview
 1. Presenters and their Perspectives
              Kevin McKoskey, SPA
              Jerry Taintor, Purchasing

              Karen Klein, Payroll and Tax



 2. Format
              First Hour – Presentation
              Second Hour – Roundtable and Questions



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B. Documents/Theories
   Covered
 1. Panel to cover WHY fields are
     relevant vs. HOW to prepare document
 2. Contract for Professional Services (CPS)
 2. Payment Voucher (PVC)
 3. Panel not covering Employee Payments
     (EP); which were covered under the
     Travel session on 10/12/04



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C. Purpose of Training
 1. Responsibilities
              Key areas to review before approving
               documents
              Who to call with questions

 2. Issues/Concern Areas
              Consultant vs Subcontract
              Employee vs Consultant
              Description of Services
              Basis for Price; Assurance of Reasonable Price



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II.          SPA’s Perspective
             Kevin McKoskey
             Sr. Grant Manager

     Sponsored Projects Administration
     Phone: 612-624-5066
     Fax: 612-624-4843
     Email: kevin@umn.edu


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What’s the Difference
             Between a Subcontract
               and a Contract for
                 Professional
                   Services?




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Definitions:

• Consultants & Professional Services
  - contractual agreement for
  - short-term
  - expert advice or
  - specialized services
  - with no responsibility for a portion of
    work scope on a sponsored project
  - is not an employee


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Definitions:
• Sub-award (Subcontract)
  - contractual agreement that is includes
     terms and conditions of the prime
     award that makes the
  - Sub-awardee responsible for a portion
     of work scope
  - time intensive (usually coincides with
     some or all of the budget periods)


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Proposal Budget:
• Consultant & Professional services
  -   included in the sponsored project budget
  -   examples:
       advisory/oversight board members
       software programmers
       editors
       other technical experts
  -   costs include:
       fees
       expenses such as travel
    - justification of need for consultant is
      necessary

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Proposal Budget:
• Sub-award/subcontract
  -    included in sponsored project budget
  -    provided by sub-recipient with
  -    PI statement of intent
  -    sub-recipient’s institutional approval
  -    sub-award/subcontract budget consists of:
        direct costs
        F&A (indirect) costs (approved rates)
    - prime award budget applies F&A on first
      $25,000 of project period
    - justify use of the sub-awardee or
      subcontractor in the "research plan"
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Negotiation and Execution:

• Consulting/Professional Services:
   – use electronic Contract for Professional
     Services form – two parts
   – internal Info/approval process via FN
   – contract signed by vendor, authorized
     signer & Purchasing (if applicable)

•      Sub-award/subcontract:
     – PI provides workscope/budget/info
     – SPA negotiates and executes
     – specific agreement that includes terms
       & conditions of the prime award

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Payment Approvals:

Contract for Professional Services:

• approval by PI or anyone who can
  evaluate performance under the contract

• certified approvers approve payments
  > $1000



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III. Purchasing’s Perspective
     Jerry Taintor
     Buyer

     Purchasing Services
     Phone: 612-624-6752
     Fax: 612-626-0366
     Email: taint001@umn.edu


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Financial Forms Nirvana (FFN) Contracts
for Professional Services (CPS)
Note: paper contracts follow old process/ approvals; new bid
threshold applies to all contracts)


 http://purchasing.umn.edu/forms/cfps.php
 CPS Form, CPS – (FFN) Policy, CPS Terms and
    Conditions, CPS Attachment: Travel Reimbursement
    for Contractors, Administering Contracts, Amending
    Contracts, MN New Hire Form, Professional Service
    Worksheet, CPS Data Collection Sheet, Imaging and
    Exception to Purchasing Policy for Professional
    Services.


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POLICY – January 1, 2004

 Contracts under $10,000
 Contracts between $10,000 and
  $49,999
 Bid Threshold - $50,000 and greater
 Competitive Process through
  Purchasing Services RFP Template
 http://purchasing.umn.edu/docs/RFPModelCFPS.doc



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Regents Reporting
Requirements

 Contracts at $250,000 and greater (or
    contracts amended to $250,000 or
    greater)
 http://purchasing.umn.edu/need/docket.php




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Bidding/Exceptions
Requirements
 Note: All exceptions are reviewed and
    approved/denied in Purchasing
    Services
 http://purchasing.umn.edu/docs/DeptCFSExcep.doc




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FFN – CPS

 Payments – Expense Payments Grid
 Reminder - FFN encumbers all funds
 http://purchasing.umn.edu/docs/ExpensePayGrid.pdf




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QUALITY OF INFORMATION
PROVIDED IN THE CPS

 Description of Services
 Vendor Qualifications
 Basis for Price
 Assurance of Reasonable Price




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Description of Services
 “Include a complete description of the
 expected service, duties, milestones,
 contractor and University
 responsibilities, reporting requirements,
 work products, and any other
 deliverables.”
 The more detail the better!


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Vendor Qualifications
 “Vendor qualifications and background,
  or basis for vendor selection:”
 Provide information about degrees,
  certifications, professional development
  activity, past work experience with
  other public institutions, state or
  governmental entities.

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Basis for Price
 “Basis for price” (250 characters max)
  Describe the vendor’s basis for the total price:
  breakdown of tasks with hourly rates,
  percentage of first year’s salary (for search
  firms), published price schedule, etc.”
 E.g., If an hourly rate will be paid, provide a
  list of tasks and estimated hours per task.
  This amount should support the contract total.


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Assurance of Reasonable Price
 “Assurance of reasonable price (250 characters max)
  If you did not use a competitive process that would
  have allowed a price comparison among various
  vendors, you must describe how you know the price
  to be reasonable.”
 Providing a comparison between two or three
  different contractors who perform similar work is the
  next best reply. E.g., Vendor A charges $50/hr.,
  Vendor B charges $75/hr., this vendor charges
  $55/hr.
 Or, Our vendor charges $55/hr. which is well below
  the industry average rate of $65 - $85 per hour.
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IV. Payroll/ Tax’s Perspective
    Karen Klein
    Payroll Tax Consultant
             HRMS/Payroll
             Phone: 612-625-7549
             Fax: 612-626-8924
             Email: k-klei@umn.edu

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Employee vs. Contractor
 Worksheet Questions – Guidelines
 Prior Employees
 Work automatically considered
  employee compensation by IRS
 Individual vs. Sole Proprietor




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Tax Issues

 Foreign Nationals
 Minnesota Nonresidents
 IRS Reporting




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E vs C - Worksheet Questions
 Guide for Worksheet for Consulting and
    Professional Services
        http://www1.umn.edu/ohr/payroll/CFPSworksheetg
         uide.pdf
 Providing Training
 Personal Investment in “facilities” doesn’t
  always mean a building or office space –
  equipment
 Telecommuting
 Profit or Loss
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E vs C - Prior Employees
 “When can my terminated employee
  come back to work as a contractor?” “I
  was told…”
 Type of Work – same job, finish project
 Contract
 IRS Primary and Secondary Factors



11/30/2010                                  29
E vs C – Always Employees
Per IRS
 As a result of IRS Audit, University
  required to treat certain duties as
  always performed by employees.
 Seven jobs listed, including Project
  Interviewer and Program Coordinator
 Per IRS “Equivalent” duties – not just
  job title

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E vs C - Individual or Sole
Proprietor

 Differences
      Free Lance
      Has employees
      DBA

 SSN/EIN



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Tax Issues – Foreign Nationals
 IRS Reg. 1.441-1 Actual Knowledge
 Sourcing Income
 Visa Status
   http://www1.umn.edu/ohr/payroll/NRAcontractor03.pdf
 B1/WB Rules and Certification
     http://www.isss.umn.edu/forms/pdf/bwb/reimbursement.pdf
 ITIN – Must ASK for TIN
 Expense Payments – Accountable Plan Rules
 What do you forward to Payroll?
        B1/WB Honoraria & Expense Form
        Copies of Expense Reimbursement substantiation
        ITIN and Tax Treaty related Documents
11/30/2010                                                     32
Tax Issues – MN Nonresidents
 http://www.fpd.finop.umn.edu/groups/ppd/documents/
    appendix/MNTax371.cfm
 Entertainer Tax – 2%
 Minnesota Withholding Tax
   Nonresident rules
   6.25% of payments equal to or more than $7,700

 For Questions, contact Disbursement
    Services

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Tax Issues – IRS Reporting
 Form 1099-Misc.
    Annual payments of $600 or more
    Any appropriate taxes withheld
                2% Entertainer Tax
                MN Nonresident Tax – 6.25%
                Federal Back-up Withholding – 28%
 Form 1042-S
    Issued to Foreign Nationals to report US source
     income and any taxes withheld
                30% withholding on payments and unsubstantiated
                 expense reimbursements

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                 Thank You
 Questions???
 Panel Members
      Karen  Klein, Payroll/Tax, 612-625-7549,
       k-klei@umn.edu
      Kevin McKoskey, SPA, 612-624-5066,
       kevin@umn.edu
      Jerry Taintor, Purchasing, 612-624-5762,
       s-sher@umn.edu

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V. Roundtable
Please feel free to ask questions to any of
  the panel members. When you ask the
  question, please use the microphone so
  that outstate participants can hear the
  discussion.




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