Most business are not aware of the extent of the severe penalties for classifying workers as subcontractors when they are considered employees by the IRS and other agencies.
First, failing to properly classify a worker as an independent contractor can result in devastating penalties by the IRS.
Normal employee wages are subject to FICA (Social Security and Medicare) and income tax withholding. If the IRS determines that an individual has been misclassified, it can levy several penalties against the employer in addition to requiring payment of back taxes.