From a 3 part series on independent contractors vs. employees in Resource Magazine —
The perils of misclassification are numerous and severe. Federal law imposes serious tax liability on employers for misclassifying a worker as an independent contractor, including the payment of all applicable federal taxes due—even if already paid by the worker—plus interest plus penalties. State laws will impose additional back taxes, interest and penalties for failure to deduct and pay state income tax, unemployment insurance, disability insurance and the like.
Further, whether or not an employer has properly classified a worker as a non-employee for tax purposes, a court can conduct an independent inquiry to determine whether a worker is an employee for the purposes of strict liability for the worker’s torts committed within the scope of employment.
Read the full story at Resource Magazine Independent Contractors vs. Employees