Gain Insight into How the IRS Would Classify Your Workers

To mitigate the risks associated with worker misclassification, companies are urged to take a proactive stance. Withum’s employee classification tool provides a valuable resource for businesses seeking to self-correct and align with IRS guidelines.

By answering a series of questions through this online platform, companies can gain insights into how the IRS would classify their workers, thereby avoiding costly employment tax disputes with the government.

A Proactive Approach with Withum’s Employee Classification Tool

Navigating the Complex Terrain of Worker Classification

Misclassifying employees as subcontractors can result in a cascade of penalties, as determined by the IRS.

In cases of unintentional misclassification, companies may face fines of $50 for each W-2 form not filed, a penalty of 1.5% of the employee's wages, and potentially 40% of the unwithheld FICA taxes.

For intentional misclassification, the consequences escalate, with the IRS holding employers responsible for 100% of FICA and income taxes, along with severe penalties and interest.

Beyond financial penalties, misclassifying workers exposes companies to legal action. High-profile lawsuits against industry giants such as Uber, FedEx, and Citigroup highlight the gravity of this issue. In 2020, FedEx Ground Package Systems settled a lawsuit for $2.4 million, addressing allegations of misclassifying drivers as independent contractors. As a result, the spotlight on misclassification has grown, prompting increased scrutiny from states, government officials, and individual businesses.

Despite efforts to address the issue, the IRS estimates that millions of workers are still misclassified today. State-level studies suggest that 10-20% of employers misclassify at least one worker as an independent contractor. Recognizing the widespread nature of this problem, various initiatives are underway to combat misclassification, involving collaboration between states, government bodies, and businesses.

Take a proactive approach with Withum’s Employee Classification Tool.

Connect with Our Worker Classification Expert

Marcus Dyer


Princeton, NJ - Corporate Headquarters