This Simple Difference Could Cost You Thousands in Taxes Take the time to clearly define your employees and subcontractors.

By Mark J. Kohler

Opinions expressed by Entrepreneur contributors are their own.

What's the difference between an employee and a subcontractor?

Entrepreneur Network partner Mark J. Kohler understands why business owners hate asking this question: It's tedious. Rather than properly examine the difference, many business owners choose instead to take a shortcut and simply label everyone in question a subcontractor, giving them a 1099 tax form and washing their hands of the whole situation.

However, being sloppy on state and federal tax forms can be dangerous. If your subcontractors turn out to be employeees instead, you could be on the hook for a lot more money than you realize.

Click play to learn about how you can tell the difference between an employee and a subcontractor and save yourself the time, energy and money that cutting corners could cost in the long run.

Related: Should You Invest in a Self-Employed Pension?

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Mark J. Kohler

Entrepreneur Leadership Network VIP

Author, Attorney and CPA

Mark J. Kohler is a CPA, attorney, co-host of the podcasts Main Street Business and Directed IRA Podcast and a senior partner at both the law firm KKOS Lawyers and the accounting firm K&E CPAs. He is also a co-founder of Directed IRA Trust Company. He is the author of The Tax and Legal Playbook, 2nd Edition and The Business Owner's Guide to Financial Freedom.

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