Professional Service Guidelines
A professional service payment is required when an individual or company requires a fee for any service, including speaker fees, performing artist fees, DJ fees, instructor fees, referee fees, etc. Also included in this classification is payment to companies or individuals for rental of property (i.e. payments to landlords). These service payments to individuals or businesses are classified as income to the recipient and must be reported to the IRS. ASA must process these payments through a separate (University) system to comply with IRS reporting via tax form 1099.
How Does ASA Proceed With The Information Provided By A Company Or Individual?
This depends on whether the payee is an individual or company. (See “Sponsor Will Make Check Payable To:” line on University Standard Agreement (if on campus) or invoice or contract (if off campus).
- If the payee is an incorporated company, then the company must provide its valid Federal Tax Identification or Employer Identification Number (EIN) on the contract or invoice, not a Social Security Number (SSN). Once the contract process is completed by the student organization (see below), the treasurer must submit a check request to accompany the contract. Currently, ASA processes the check internally within three-five business days. If the payee (company) is anything other than incorporated (LLC, DBA, or Sole Proprietor), then the form used to process payment is the 1099 request form. These 1099 payments are processed through Accounting Operations and take a minimum of 15 business days to receive a check.
- If the payee is an individual, then the individual must provide their own SSN or individual EIN number (the EIN number must be associated with the payee). Any payments to individuals, regardless of which number is used, are processed through the Accounting Operations office. Once the contract process is completed by the student organization (see below), the treasurer must submit a 1099 request. It takes a minimum of two weeks to receive a check. If the date submitted is too close to the service date listed on the contract or invoice, ASA will not process the payment until after the event date to ensure the service has been provided.
Notes to Consider
When contracting with an individual, please make sure to find out if the payee is or was an employee of Penn State University during the current calendar (tax) year. Employment status at the University can impact if/and/or how a payment can be made.
If the payee is an employee of Penn State University the following guidelines must be followed:
- Payments to Exempt employees can be made through Penn State Payroll as a SUPP (Supplemental) payment if approved by the employee’s HR office and meets the requirements for the supplemental pay. This should be determined during the program registration process.
- Non-Exempt employees are NOT permitted to receive any supplemental pay. If a non-exempt employee wants to provide a service to a student organization, then that individual must obtain an EIN number from the IRS, and use the EIN number for all paid contracts or invoices.
- Wage or Work Study employees are not permitted to receive 1099 qualifying payments due to Penn State University guidelines.
- There are two payment options for a Wage or Work Study employee who provides a service to a student organization:
- The payee can obtain an EIN number from the IRS and provide that number on all contracts or invoices.
- The payee can be hired as a wage employee to perform the contracted duties. This employment would be listed as a separate position for the payee, and payment would be made via direct deposit, with taxes already taken out.
Instructions On How To Integrate Payment Within The Contract Process
For a University Standard Agreement (On-Campus):
Your Program Registration Advisor will provide you with two original copies of a University Standard Agreement with all of the event and payment information outlined, as well as a Non-Employee Information Form (NEIF-Information Sheet for Income and Travel). The treasurer will then complete either a check request or 1099 payment request, depending on the payee information. The student organization will mail or email these contracts and the NEIF to the payee, who will sign the contracts and form, and mail or email them back to the student organization. Once returned, the student organization (sponsor) will sign the contracts. At that point, the treasurer (or someone authorized by the treasurer to obtain purchase orders) will bring the contracts to the ASA office. ASA will process a purchase order (which is only provided to show to the remaining individuals who sign the contract that funds have been secured and encumbered for the contract payment). THE PURCHASE ORDER IS NOT FOR PAYMENT PURPOSES, ONLY TO VERIFY THAT FUNDS HAVE BEEN SECURED AND ENCUMBERED. The student organization will then take the contract to the facility manager (where the on-campus space has been reserved) for a signature, and then finally to Room 209 for the University signatory signature who will make any necessary changes to finalize and sign the contract.
For Contract or Invoice (Off-Campus):
The student organization is responsible for obtaining a proper contract and/or invoice along with a W9 form from the individual or company it is contracting with. The following information is required: fee agreed upon, service provided, location, date and time, payee’s information including Tax Id, EIN or SSN, along with the permanent company or individual address. The treasurer will need to bring this contract or invoice to ASA and fill out either a check request or 1099 payment request, depending on the payee information.
* The NEIF is required for all payees. This form determines what additional information may be required to pay non-US citizens.