First, I assume you've applied for an Employer Identification Number (EIN). If not then that would be the first step. Go to
www.IRS.Gov and complete Form SS-4, Application for Employer Identification Number and submit the form on-line to the IRS. You will immediately receive an EIN. Be sure to keep copies.
Second, I assume you have also registered as an employer with the State. If not, it would be worth your time to call your State's local office to inquire about: A) setting yourself up as an employer; B) State Unemployment Taxes and Current Rates; and C) State Withholding Tax rates. All States differ and it is important to make inquiries.
Third, while you are in the IRS website you should print: A) Form W-4, Employee Withholding Allowance Certificate; B) Form I-9, Employment Eligibility Verification; C) if appropriate Form W-5, Earned Income Credit Advance Payment Certificate; all of which your new employee must complete and you must keep on file.
If you have already done the steps above then you should obtain a copy of the IRS Publication 15, (Circular E) Employer's Tax Guide. This guide will instruct you on calculating taxes and tell you when and how you must make deposits of Federal employment taxes. Then check with your state for their deposit requirements.
FOR AN EXAMPLE: (The following is a hypothetical example only.)
Employee A works 20 hours and you pay the individual $10 per hour.
Gross Wage $200.00
Less Withholding Taxes as follows:
.. Social Security Tax @ 6.2% = $12.40
.. Medicare Tax @ 1.45% = $2.90
.. Federal Withholding Tax @ $16.00 (Single, No Exemptions)
.. State Withholding Tax @ $5.00 (Example Purposes Only - all states differ)
Total Taxes to Withhold: $36.30 (Calculated $12.40 + $2.90 + $16.00 + $5.00 = $36.30)
The Net Check to the Employee would then be: $163.70
You should keep a payroll ledger. You will need to complete quarterly and yearly tax forms as required.
Best of Luck!
