When the IRS audits a nonprofit organization, one of the first things it looks at are the employment records and the classification of any independent contractors. If the organization has not been withholding income taxes and FICA payments for those the IRS considers to be employees, it can be a costly experience for the organization, and potential personal liability for the "responsible persons" who failed to withhold. Although it may seem like a real bother, err on the side of withholding.