This is an excellent time to face this problem and resolve it.  You do not want to wait until the IRS approaches you.  The IRS has a Voluntary Classification Settlement Program (VCSP) that will allow you to reclassify your workers as employees for future tax periods with limited liability for the past. You begin the process by filing Form 8952.  Several requirements must be met to be eligible for this program.  Among these are: (1) the employer must have treated the employees as independent contractors consistently for the past three years, including filing Form 1099 and (2) the employer cannot be currently under employment tax audit.  If the employer qualifies, he will pay 10 percent of the employment tax liability that would have been due on compensation paid to the workers for the most recent tax year and will not pay interest and penalties.