"For $5,000 of liability, are you gonna call Mark Klein? No! They'll pay the $5,000, sign the consent form, say 'See ya later, awesome.'" he said. 

But then the consent form gets sent to the IRS, which says to the company, "I understand you have employees—have you been withholding on them?" The company responds, "No, they're independent contractors." But then the IRS says, "But they're not; you just admitted it" with the consent form. 

So then, he said, the IRS will charge $10,000. And the state wants another $2,500. Then FICA taxes kick in at $7,500. That's about $20,000 total. "Oh, by the way, there's 10 employees. That's $200,000. And why just look at one year? Why not three? That's $600,000." What's more, he said, withholding taxes are generally considered to be a trust fund, meaning that if the company goes under because of the $600,000 bill, the company's CEO or CFO remain personally liable for the sum. 

"And then they get me involved. And my client says, 'This is crazy, they really are independent contractors!' ... You go to court, and the judge says, 'Before we start, you signed a consent to the unemployment insurance conceding they were employees. So were you lying then or now? Your choice.' And that kills your credibility going forward," he said. 

"So even though unemployment insurance is a little nothing in most client's eyes, please be careful," he said.