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Generally, a scholarship is an amount paid for
the benefit of a student, to aid the student in
the pursuit of study at an educational
institution.
Scholarships and fellowships are payments to
students for which no services are rendered
or required. These awards are granted for the
purpose of off-setting the cost of tuition,
room and board, fees and/or other incidental
expenses of attending the University.
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Scholarships are usually granted for some
academic purpose (Recruitment), or for
academic performance.
There should be “no strings attached” to the
award.
A scholarship is more than a name.
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The IRS classifies scholarship/fellowship payments
as Miscellaneous Income. No taxes are withheld
from these payments, although the University does
report the payments to the IRS(1098-T). If the
scholarship/fellowship awards are not used by the
student to offset the cost of qualified tuition and
certain other expenses specified in the tax law then
these moneys may need to be reported as income
to the IRS by the student.
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A stipend is provided as a subsistence
allowance for fellows to help defray living
expenses during the research training
experience. It is not provided as a condition of
employment with either the Federal
government or the sponsoring institution.
The term stipend can sometimes be misused
and is used often in situations where a
department wants to pay funds to a student.
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The true intent and purpose of the payment
must be determined.
The purpose of the payment helps in
determining which department would pay
the student.
If work or service is required to receive the
award, this could be a compensation
situation and would not constitute a
scholarship payment.
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Research payments are usually considered as
payment for work and would be Payroll.
To be considered a scholarship payment:
 The student’s research should be independent, i.e. not
assisting faculty with UCF research.
 The student must be receiving academic credit for the
research.
 The student should be receiving compensation for
research work hours separate from the scholarship.
 The purpose of the scholarship award cannot solely
be the research.
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Unpaid Internships are always problematic
because a scholarship payment can be
deemed as payment for work.
To be considered a scholarship payment:
 The student must be receiving academic credit for
the internship.
 The student should be receiving compensation for
work hours separate from the scholarship.
 The purpose of the scholarship award cannot
solely be the internship.
Federal crackdown on worker classification issues will yield
$7 billion over 10 years
 Labor Department estimates 30% of employers
misclassify employees
 Misclassification can deny workers’ basic rights and
protections
 2013 TIGTA Report – Estimated that employers save, on
average, $3,710 per employee by misclassifying workers.
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 $1,192,931 in taxes not properly reported in 1 year by an audit of
778 employers.
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Consolidated Appropriations Act of 2014 funded state
unemployment offices to address misclassification of
workers.
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Employee:
 Individual who performs services for you who is subject to
your control regarding what will be done and how it will be
done
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Independent contractor:
 An individual who performs services for you, but you
control only the result of the work
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Scholarships:
 An amount paid to or allowed for the benefit of a student
to aid such individual in pursuing their studies. Does not
apply to any portion of any amount received which
represents teaching, research or other services provided
by the awardee.
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Types of control
 Behavioral control
 Financial control
 Relationship of the parties
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Type of instruction given
Degree of instruction
Evaluation systems
Training provided by the business
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Key fact to consider:
 Whether the business retains the RIGHT to
control the worker
▪ Regardless of whether the business actually exercises
that right
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Significant investment
Unreimbursed expenses
Opportunity for profit or loss
Services available to the market
Method of payment
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Written contract
Employee-type benefits
Permanency of relationship
Services provided a key activity of business
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Requirements for reports
Payment of business or travel expenses
Investments in facilities
Work for multiple companies
Control over discharge
Level of instruction
Degree of business integration
Control of assistants
Flexibility of schedule
Need for on-site services
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Method of payment
Provision of tools & materials
Realization of profit or loss
Availability to public
Right to termination
Amount of training
Extent of personal services
Continuity of relationships
Demand for full-time work
Sequences of work
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Good reasons
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Specialized expertise needed
Non-integral undertakings
Short-term projects
Institution doesn’t have employees who do this job
Bad reasons
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Payroll tax and benefit avoidance
Circumvention of personnel rules and pay restrictions
Quicker than going through HR
It is what the worker wants
It is the way we have always done it
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Contractors who worked for the university in
the past 12 months
 Rehire former employee to perform similar duties
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Employees with a side business unrelated to
their day job
 Photographer at holiday parties
 Pianist at a retirement function
 Interpreter on an urgent basis or crisis mode
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New hires
 Substitute teachers
 Graders
 Temporary help (workers who perform similar duties
performed by employees)
 Workers who spend most of time in offices provided
by university
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Hire contractors who will work for the university
within the next 12 months
Workers who receive continuing payments over
several years
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Classification by function worker performs
 Teaching a course that earns credit
▪ Employee
 Teaching a course that does not earn credit
▪ Employee
▪ Unless individual meets criteria of holding oneself out as a contractor
 Providing services related to research
▪ Employee
 Substituting for a TA
▪ Employee
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Classification by function worker performs
 Serving as a proctor or grader
▪ Employee
 Receiving an honorarium
▪ Contingent on current status (i.e. if an employee, then treat
as wages)
 Moonlighting
▪ Employee
▪ Unless individual meets criteria of holding oneself out as a contractor
 Officiating a sporting event
▪ Independent contractor
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Payment of FICA taxes for both worker & employer, & income tax
withholdings
 Possible offset by certification from worker that attest to reporting
taxable income & appropriately paying taxes
Penalties for failure to withhold income taxes & file required tax
forms & other filings
 Additional costs
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 Administrative burden of filing amended W-2s; cost to employee for
re-filing of their tax return
 Possible retroactive applications of benefits and possible penalties
assessed by the state, such as:
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Retirement contribution
Health insurance coverage
Sick/vacation leave
FAPLAN Contributions
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Instructors and substitutes
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Lawyers
Schedule of classes & rooms provided
Prescribed teaching hours
Engaged to teach certain subjects
Students assigned to class by college
Required to give written exam
Use college grading system
Instructor may provide substitute
▪ Must have certain qualifications
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Employee or Independent Contractor?
 Employee
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Adjunct professor
 Taught online courses
▪ 4-12 courses per year
▪ Separate contract for each course
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Required to follow employment policies
Paid fixed amount for each course
Provided with syllabus
Established own work hours
Able to work from any location
Course dates set by university
Web interface provided by university
Required to provide report including evaluation of student learning
Employee or Independent Contractor?
 Employee
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Proctors
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Administer examinations
Times & places of exams arranged by proctor
Procedure for giving exam provided
Required to submit tests with report at end of exam
Paid by hour
▪ Guaranteed minimum of one hour
 Reimbursed for expenses
 May be discharged at any time
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Employee or Independent Contractor?
 Employee
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Biologist
 Grant money to support basic research project
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Salary for researcher
Supplies and equipment
Assistance
Overhead for institution
 Extent of research determined by grantee
 Place and manner of performance determined by
grantee
 Unused funds returned to grantor foundation
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Employee or Independent Contractor?
 Independent Contractor
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Research associate
 Conducted scientific research
▪ Type of research specified
 Subject to rules and regulations of the Bureau
 Entitled to the rights & privileges which accrue to
members of its staff
 Provides report including results of research
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Employee or Independent Contractor?
 Employee
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Interns
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Lodged in university dorms & provided transportation
Paid $3,000
Not a degree requirement
Conducted research
▪ Assigned to work on particular project
▪ Worked with employee of grantor as a mentor
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Not given instruction on how to perform services
Written report and presentation required
Materials & supplies provided by grantor
University carried worker’s compensation insurance
Full-time for ten weeks
Performed services under university name & did not perform services for
others
Employee or Independent Contractor?
 Employee
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Consultant
 Written agreement
▪ Manage the computerization of records
▪ Directed as to scope of duties & responsibilities
▪ Terminated by either party
 6-8 hours per day
▪ 6 months
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Firm's location & home office
Paid hourly
Reported to director 2-3 times per week
No benefits
Furnished own computer & printer
No training
Held himself out to public
Performed services under own business name
Employee or Independent Contractor?
 Independent Contractor
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Retired employee
 Formerly account manager, project manager, operations
manager, & director
 Advice on sales & engineering issues
▪ Two years
 Installation of new system
 Worked at Firm’s location
▪ Worked out of conference rooms
 Paid hourly
 Time off
 Set own hours
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Employee or Independent Contractor?
 Employee
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Off duty police officer
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Provided security for university football games
Volunteered with respective police jurisdiction
No instruction provided
Hours established by university
Meeting before duty began
Equipment provided by worker’s respective jurisdiction
Individual posts assigned by respective jurisdiction
Written reports possible
Paid hourly
Employee or Independent Contractor?
 Employee
Contacts:
UCF Office of Student Financial Assistance
Michael Bell 2-0090
UCF Tax – A division of Finance & Accounting
Joel Levenson 2-0235
Meghan McCollum 2-1013