Problematic Expense Guide - A to Z

• Stipends Paid for Services Rendered – The payment or reimbursement of a stipend to an individual in exchange for services rendered to the University is generally a prohibited use of University funds.
  
  
  • Examples
    • Paying an individual a stipend in exchange for teaching a workshop for our students over an extended/ongoing period of time.
    • Paying an individual a stipend to assist in a UNM laboratory for a period of time.
      
      
  • The Reason this is Unallowable – The IRS has strict Employee vs Contractor rules which the University is required to follow whenever an individual renders services to the University. These rules require the University to make an official Employee/Contractor determination based on the facts and circumstances, and act accordingly, since employees and contractors are treated differently for tax purposes.  Federal tax laws prevent the University from simply classifying a payment as a “stipend” and ignoring the actual tax consequences of the underlying transaction.  IRS regulations require year-end Tax form reporting on either IRS form W-2 for employees, or form 1099-NEC or form 1042-S for contractors.  In certain cases involving foreign individuals, the University may be prohibited from paying any wages at all depending on the type of visa the individual used to enter the country.  To pay an individual a stipend in exchange for services rendered may affect proper IRS tax form reporting and will generally violate IRS Employee vs Contractor rules.
    
    
  • Possible Allowable Alternatives - Try this Instead:
    • For an employment relationship, hire the individual as a term or temporary employee through UNM Human Resources.
    • If HR determines that no employment relationship is possible, then submit a requisition to the UNM Purchasing department to contract for the services to be rendered by the individual.