Personal Payments - Guide to the Different Types of Personal Payments at Purdue
The outline below lists the required paperwork for each type of personal payment based on person-type. Please review Personal Payments training for additional details.
Taxability: Always taxable income
Business Purpose: Consulting payments are typically paid to non-Purdue employees providing services to the university. Unsure if the relationship requires a consulting agreement? Complete the consultant checklist found on the Consulting Agreements SharePoint site. Consultants should not engage in any work or be paid for any services until a fully executed agreement is in place.
Statement of Work: Each consulting agreement requires a Statement of Work, where the deliverables for which a consultant will be responsible for are defined. As this agreement is a contractual obligation, the deliverables must be clearly and specifically stated and may not touch upon the University's core missions.
- Create Statement of Work
- Substitute W-9
- Use when making participant payments, paying non-Purdue student or non-staff awards, reimbursement of fees/expenses to speakers, honoraria, artists/entertainers, or consultants. Attach to Invoice Voucher, Business Office Form DIV. A Substitute W-9 is required for payments to an individual by a direct invoice voucher. It is not used for an individual who should be paid through payroll. The form serves as documentation that an individual is entitled to receive a payment.
- Payee Certification
- Will be required on all ZV60 payment
Determination of Independent Contractor Status
In keeping with IRS requirements for independent contractors, find the IRS links below to help determine if the person should be classified as an Employee or an Independent Contractor.
- IRS Topic 762 – Independent Contractor vs. Employee
- Explanation of an Independent Contractor vs Employee
- IRS Twenty point checklist for Independent Contractor
Typical Documentation Required:
- Domestic Payments: Payee Certification Form, consultant's invoice and a copy of the fully executed consulting agreement.
- Payments to foreign consultants physically located within the United States when performing services would require the same documentation plus either a W-8BEN-E (businesses) or Glacier documents (individuals). The Glacier Tax Summary Report will indicate correct forms for income type and copies of the required immigration documents to attach.
Resources: AP Business Processes; Consulting Agreements SharePoint site
Please Note: All payments are processed via ZV60.
Payee Type |
Tax Status | Required Documentation |
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Employee | N/A | Employees cannot be consultants. Payments should be made through payroll. |
Non-Employee | US Citizen, Perm. Resident |
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International |
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Taxability: Always taxable income
Business Purpose: The university sometimes provides an allowance to new employees when moving to a new location. View Moving Allowance (Relocation) for additional information.
Typical Payees: New employees
Typical Documentation Required: When paid on a ZV60 30 days from hire:
- Employee's offer letter
- PC Form
- Moving Allowance Template
- Moving Allowance TaxCalculator
Payee Type | Tax Status | Required Documentation | Notes |
---|---|---|---|
Employee | N/A |
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Contact appointment specialist. |
Future Employee (Offer has been accepted) |
US Citizen, Perm. Res., Res. Alien |
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The last 4 digits required on Payee Certification Form |
International |
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Last four digits required on Payee Certification Form. If person does not have an SSN, Tax Department will issue a 999 number. |
Taxability: Taxability depends on immigration status
Business Purpose: Allows departments to have outside persons collaborate in research activities. Allowable per diem rates. This is Non-Paid Non-Employee status.
Typical Payees: Scholars, Student Intern, International Visitors; US Citizen or International should have funding from home institution.
- International Students and Scholars Resources: https://www.purdue.edu/ippu/iss/scholar/faculty-staff/i-am-a/visitingscholar.html
Typical Documentation Required:
- PC Form
- Invitation Letter (formally Offer Letter)
- Glacier for international payees
Payee Type | Tax Status | Required Documentation |
---|---|---|
Non-paid Employee | N/A |
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Student | US Citizen, Perm. Resident |
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International |
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Taxability: Non-taxable income, unless for spouse/family
Business Purpose: Job Search expenses (Food, Travel, Lodging, etc.)
Typical Payees: Prospective employees (Faculty, staff or graduate students with employment)
Typical Documentation Required: Form 17C and original receipts
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Note: Reimbursements for the prospective employee are tax–free; any expenses reimbursed for spouse and/or others is taxable income to the prospective employees.
Payee Type | Tax Status | Required Documentation | Notes |
---|---|---|---|
Non-Employee |
US Citizen, Permanent Resident, International |
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Taxability: Always taxable
Business Purpose: Award: Achievement, performance or other criteria; Prize: Competition or other criteria
Typical Payees: Payments to enrolled Purdue students paid through Financial Aid; Payments to Purdue employees paid through payroll; Non-Purdue students and others are typically paid through Accounts Payable.
Typical Documentation Required: Backup documentation (signed DH memo or other approval docs). Click here to view the Awards and Prizes Log Sheet.
Payee Type | Tax Status | Required Documentation | Notes |
---|---|---|---|
Employee | N/A |
For non-job related: International
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If award is job-related, should be processed through Payroll payment (i.e. Bravo Award, incentive pay, etc.)
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Non-Employee |
US Citizen Permanent Resident Resident Alien |
STUDENTS
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International |
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Business Purpose: Financial support based on academic achievement or other criteria that may include financial need intended to offset the cost of the student’s education.
- Scholarships paid up to tuition and fees (qualified education expenses) are non-taxable scholarships.
- Scholarships paid above tuition and fees are non-qualified education expenses. These are always taxable, but are reported differently, based on the recipient's citizenship and tax residence.
Typical Payees: Paid to enrolled students or who will be enrolled.
Typical Documentation Required: All scholarships for enrolled students are paid through the DFA scholarship awarding process. Scholarships paid above tuition and fees may require a PC Form, supporting documentation, Glacier documentation required for internationals. (Maintain backup documentation; department selection processes)
Reference: Reference/Resources - Finance
Payee Type | Tax Status | Required Documentation |
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Scholarships | Currently enrolled |
Purdue students are paid through Financial Aid. Payments to students need to be evaluated to determine if they should be processed through payroll or ScholarshipU, or by other methods.
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Not currently enrolled |
If international:
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Taxability: May be taxable income. Taxability depends on employment status, timing of submitting expenses, or business purpose, student benefit for education, etc.
If the reimbursement is submitted past 180 days from when the business expense was incurred, the reimbursement is table income to the payee.
Business Purpose: To allow persons to defray cost of materials, travel, etc.. Often, the payment is not a true reimbursement, but a payment for an award, travel grant, request/proposal, etc.
Typical Payees: Employees: Staff, faculty, students, Non-employees: Visitors/others coming to campus to collaborate or provide services, Student-related travel
Typical Documentation Required: Employee: Receipts and business purpose. Non-employee: PC Form, receipts, purpose. If international non-employee, Glacier required.
Reference: IRS Accountable Plan considerations: https://www.purdue.edu/hr/buspur/nonemppay/taxablepayments.php
Payee Type | Tax Status | Required Documentation |
---|---|---|
Employee (including Grad Staff Appointment) | N/A |
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Non-Employee | US Citizen, Perm. Resident |
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Non-Employee |
International (WT and B2 visa holders are limited to 9 days reimbursement (after which, 9-5-6 statement must be signed)) |
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Taxability: Always taxable income
Business Purpose: Payment to a person who participates in an IRB approved research study project
Typical Payees: Individuals (employees or non-employees), Domestic or International
Typical Documentation Required: PC Form or Human Subject Invoice Log, Glacier required if international; IRB Approvals and other documentation
Reference:
Payee Type | Tax Status | Required Documentation |
---|---|---|
Employee | N/a | |
Non-Employee | US Citizen, Permanent Resident | |
International |
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Taxability: Always taxable income
Business Purpose: Non-service payment made to a speaker or lecturer as a "thank you" and gesture of appreciation.
Typical Payees: University visitors who are not paid for a service.
Typical Documentation Required: PC Form, Glacier required if International payee. Obtain appropriate backup documentation (receipts, invoices, approvals, etc.)
- Preapproval by Payroll and Tax required; cannot be related to EE's general EE function/job duties.
Resources: Honorarium/Non-Service payment for an International Visitor (organized by Visa type)
Payee Type |
Tax Status | Required Documentation |
---|---|---|
Employee | n/a |
If allowed:
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Individual This includes businesses with tax classification of individual, sole proprietor, or single member LLC |
US Citizen, Perm. Resident | |
International |
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Taxability: Always taxable income
Business Purpose: Paid to performers, artists and athletes for artistic or entertainment services
Typical Payees: performers, artists, athletes
Typical Documentation Required: PC Form, contract, Glacier (Includes required documents) for international payees. May have an invoice.
Payee Type | Tax Status | Required Documentation |
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Employee | N/A |
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Non-Employee | US Citizen, Permanent Resident, International |
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Payment Methods
It is important to note that Ariba and Credit Cards cannot be used for personal payments. Only the methods and processes described in this guide are appropriate for personal payments. Cash advance requests and wire transfer requests require additional documentation as detailed below.
Taxability: Usually not taxable
Business Purpose: Allows University employees to have funds before a business trip
Typical Payees: Employees
Typical Documentation Required: a Project Advance Form is needed if the trip is research related and should include an expense estimate + a Promissory Note. An IRB number must be included on the Project Advance Form.
Please Note: Any unused cash advances not returned to the University after completion of the trip or event that necessitated the advance will become taxable income to the employee.
Payee Type | Tax Status | Required Documentation | Notes |
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Employee | n/a |
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Project Advance Process ZV60 process to include the documentation of the event/reason for the request and the IRB number. Cash Advance Reconciliation sheet must be returned to Tax Department after funds are disbursed |
Taxability: Using this method of payment does not impact the taxability of the payment.
Business Purpose: this method is frequently used for international payees
Typical Payees: International payees (persons or companies)
Typical Documentation Required: Specific payment information, PC Form, Bank Verification Form, Wire Transfer Request Form
Resources: ACH Wire Payments - Finance
Payee Type | Tax Status | Required Documentation |
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Individual (including businesses with tax classifications of individual, sole proprietor) |
US Citizen, Perm. Resident |
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International |
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Corporation | Domestic |
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International |
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Additional Information and Resources
From time to time, individuals who are to receive money from the University for services, honorariums, human subject payments, etc. ask to have those payments made to a charitable organization instead of to themselves.
Per IRS guidelines, the individual is the beneficial owner of the income, because control over the income is able to be exercised by the individual. Therefore, the payment is still taxable to the individual as income because they controlled the disbursement of the funds, even if the payment were to go directly to a charitable organization.
It would be a significant administrative burden for Purdue to issue payments to charitable organizations while maintaining and providing tax records for the individuals who directed their payments be made to a charity instead of to themselves. As a result, Purdue will not re-direct payments from the individuals entitled to the payments to a charitable organization.
Requests for duplicate year-end tax statements for independent contractors should be directed to the Tax Department.
Please complete a Duplicate Tax Request Form and submit to the Tax Department for processing.
For more information, email tax@purdue.edu or call the Tax Department at 765-496-2344.
Treaty Listing of Tax Treaties (As of January 2005): This grid shows each country that has a treaty with the United States. It is divided by Teacher/Researcher, Student, Scholarship/Fellowship, and Independent Contractor.
- About 65 countries have Income Tax Treaties with the United States of America. An income tax treaty is a reduced rate on the required 30% Federal tax withholding of payments to foreign persons or entities.
- Any and all income tax treaties are administered through Purdue’s Glacier software, which are based on several variables, not limited to:
- Person or Entity has a valid US-issued Tax ID (SSN, ITIN or EIN),
- Country of citizenship and tax residence,
- Visa or immigration status,
- Prior visits to US,
- Type (s) of payment
- Any treaty limitation based on the treaty clause, i.e. Retroactive or Savings clauses, time and payment limit allowed.
GLACIER is a nonresident alien tax compliance system designed to allow institutions to efficiently and effectively collect information, make tax residency and treaty determinations, manage paperwork, maintain data, and file reporting statements with the IRS.
All payments to international persons require Glacier documents. An international person is anyone who is not a US citizen or Lawful Permanent Resident (has a PR card).
- A Purdue payee cannot access Purdue’s Glacier database by just going to the website.
- There should be a Glacier ADMIN in all Payroll or Business offices who can send the person the Glacier link.
- A person is sent the Glacier link from our database so the person can create an account from the invitation email.
Individual must complete their file in the Glacier software. Copies of all required documents listed on the Glacier Tax Summary Report should be attached to the Glacier documents. The Instruction and FAQ pages do not need to be attached.
All payments to international persons require Glacier documents. An international person is anyone who is not a US citizen or Lawful Permanent Resident (has a PR card).
- A Purdue payee cannot access Purdue’s Glacier database by just going to the website.
- There should be a Glacier ADMIN in all Payroll or Business offices who can send the person the Glacier link.
- A person is sent the Glacier link from our database so the person can create an account from the invitation email.
Individual must complete their file in the Glacier software. Copies of all required documents listed on the Glacier Tax Summary Report should be attached to the Glacier documents. The Instruction and FAQ pages do not need to be attached.
Other taxable payments requiring Glacier, even if the foreign person or company is not in the US include Royalties and License fees or subscriptions of software.
International (foreign) persons and companies have separate income taxation and reporting, as well as tax filing forms, etc. These are not the same requirements as US citizens and Lawful Permanent Residents (PR) and companies based in the US.
Visa restrictions bar payments for services/work to International Students (F1 and J1) OUTSIDE of payroll.
Payments can be made to persons and companies without a US Tax ID (SSN, ITIN or EIN).
Special tax benefits of reduced withholding are based on immigration/Visa type, type of payment, country of citizenship and residence, US Tax ID or not.
All tax determinations for tax withholding and reporting, treaty benefits, and forms required are administered in Purdue's Glacier database. The Central Tax group reviews all Glacier entries for accuracy and payment types.
Resources associated with Honorariums and other non-payroll payments for international visitors.