Our approach looks at the nature of the teachers' commitment.  If the
teachers are working on the grant and the nature of their effort meets the
definition of employee, then we pay them through payroll.   According to
the IRS an employer-employee relationship exists when the employer can
control and direct the employee, not only with respect to the results, but
also in the details and means by which the results are accomplished.

If the teachers are providing support on a grant and the nature of their
support meets the IRS definition of consultant (we apply the 20 rule test,
IRS ruling 87-24) we pay them as consultants (checks to the teachers).  If
you would like a list factors in the 20 rule test I would be glad to supply
that.  One exception is for public school teachers who are working
part-time for the University, for example teaching a course, who then
perform consultant services on a grant, we view this as intrauniversity
consulting and pay them through payroll.  Our main objective is to not
generate a W-2 and a 1099 for any university employee, our understanding is
to do so increases the university's likelihood of an IRS audit.

If the teachers are attending a class and are not performing any form of
work, the stipend is an incentive and reward for participating, we pay them
as though the funds were a scholarship (checks to the teachers).  If the
funds are paid as a scholarship the teachers are responsible for
documenting the out-of-pocket costs associated with attending the course,
and must report the difference between the scholarship and out-of-pocket
costs as income to the IRS.

__________________________________________________
Kris E. Rhodes,
Coordinator, Research and Sponsored Programs
Stephen F. Austin State University
Box 13024 SFA, Nacogdoches, TX 75962
Phone 409/468-6606, Fax 409/468-1251
http://www.research.sfasu.edu
email: xxxxxx@sfasu.edu