The IRS targets businesses that misclassify employees as independent contractors rather than employees to reduce employer costs and gain a competitive advantage. Businesses also wish to avoid legal liability/taxes such as social security, workers’ compensation, unemployment insurance, payroll, and employment taxes. If an employer-employee relationship exists, the employee's earnings are subject to FICA (Social Security and Medicare) and income tax withholding. If the IRS determines an individual has been misclassified, it may levy penalties against the employer. These penalties can be costly and, in some cases, devastating for an employer. Find out how to stay out of trouble by tuning in to this episode of the Legal Tax Junkies!