Understand the difference and save yourself from an ugly government audit. Construction firm owners continue to misclassify employees as independent contractors, and in the process, fail to pony up their share of taxes for unemployment and payroll, among others, to federal and state governments. So says the Internal Revenue Service (IRS) and state Departments of Labor, organizations that are investing millions of dollars in audits and investigations to find out. Based on the research- they have a point.