Or turned around - is the person you just hired as a contractor, actually classified as a contractor? Be sure to take a good hard look at the job description before making that decision.
Here is one case study to read through as an example:
This worker set his own hours and worked unsupervised—yet was still classified by the IRS as an employee. The case. M worked for a company moving its equipment to different sites, setting it up and maintaining it and training company employees to use it. He had no direct supervision and set his own hours, which varied depending on the work he had to do. He worked at a number of the company’s sites, and was away from home more than 200 nights a year. He was not reimbursed for his travel expenses or for the cost of repairing equipment damaged in transit.
M filed a Schedule C with his tax returns, claiming he was an independent contractor. The IRS changed his tax returns, treating him as an employee, and the case ended up in court. The ruling: For the IRS. Although the taxpayer set his own hours and worked without supervision, his work relationship had more indications of employee status than IC status. The employer asserted control over him by requiring daily reports of his work and logs of equipment location, and dictated where he would work and work to be done at each site. Although the taxpayer was responsible for many of his own expenses, he did not own or lease the very costly equipment essential to the work. He’d had no other employer for a number of years and had no other employers or clients during this period, and the current one could terminate him at any time. [McGuigan v. Comm., T.C. Summ. Op. 2019-27]