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updated 6/19/2014 2:17:48 PM ET 2014-06-19T18:17:48

Calling an employee a contractor feels like an innocent enough move, especially when your business is running on thin margins and doing so could save you bundles in taxes. But a misclassification of an employee as a contractor can cost you in the long run.

It’s easy to see the incentive: Employers have to pay taxes, government benefits, corporate benefits and potentially overtime pay for employees, but they are not responsible for these costs for contract, or freelance, workers.

Related: What Young People Want From Work

But if an employer has been incorrectly classifying employees as contractors -- and therefore skipping out on requisite taxes -- and the truth comes back to roost, the impending tax bill can be backbreaking. That’s why its important to know the difference, legally, between an employee and a contractor.

The infographic, embedded below, created by payroll software company ZenPayroll, provides a flowchart to walk you through determining whether you need to be classifying a worker as an employee or a contractor.  

Copyright © 2013 Entrepreneur.com, Inc.

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