The IRS has not exactly been cracking down on abuse. A lot of the 1099 stuff has been double taxation: contractor/employee gets paid on 1099, they properly pay all taxes including self-employment, then the IRS reclassifies them as W-2 and collects a second round of taxes and fines from the contractee/employer.

Basically the IRS considers the employer guilty unless they can track down the contractor/employee and extract paperwork from them, even though the IRS already possesses the documents that conclusively prove innocence. I'm actually mildly impressed nobody has truck bombed them yet. Crazy as he was, the airplane dude had a point.

The lesson for contractees is that you pay estimated taxes for your 1099 contractors. If they have deductible expenses, they can take it up with the IRS on April 15.