I interned as a contractor once.  The problem with contracting is that the
contractor is responsible (at the end of the year) for her personal
contribution as well as the would-be employers contribution to FICA.  Double
whammy!  So the contractor receives the full stipend up front but ends up
with less after April 15.  Good for museum, bad for poor student!

The museum where I interned found that it was easier for them to handle the
paperwork this way, but you might consider a slight increase in pay if you
do this.  Or at least let the interns know ahead of time that the IRS will
require them to pay twice the FICA that would normally be deducted if they
were employees.

Disclaimer: I'm not an accountant!  But this is my understanding of the
situation as explained to me by the person who did my taxes this year.

Good luck!
Katie Anderson

----------
>From: "Susan A. Dorko" <[log in to unmask]>
>To: [log in to unmask]
>Subject: Intern stipends
>Date: Sat, Apr 29, 2000, 1:17 PM
>

>Hi everyone--
>
>This summer my museum is going to have two interns to work on our collection
>cataloging.  They are going to receive a small stipend/honorarium.  I was
>wondering how other small museums handle this for tax purposes -- do you put
>them on the payroll and have them do a W-4, or do you treat them as an
>independent contractor and have them do a 1099?  When I worked as an intern,
>I encountered instances where I did a W-4 and had taxes and FICA deducted
>from my pay -- but there were also times where I was considered a independent
>contractor and I received the full stipend.
>
>Any input/advice would be appreciated.  You can respond to me on- or off-list.
>
>Suzi Dorko
>Director
>Waterford Historical Museum
>2 Museum Lane
>Waterford, NY 12188
>Telephone/fax: 518.238.0809
>E-mail: [log in to unmask]
>
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