Yes, it is illegal to treat employees as IC's.
What happened to me was (I was in my early 20's and a bit naive) the employer had me sign an IC agreement, but I worked as an employee. A year or two after my employment had ended, the IRS came after me for taxes they claimed I owed because the employer had not taken any taxes out, and I hadn't done so either.
I had to fill out a lot of paper work describing the work I performed, etc. and the result was my former employer had to pay taxes that he hadn't taken out on me, plus a lot of other people.
Good times!![]()

