Before the first paycheck
Get an EIN from the IRS (Form SS-4). Register for state unemployment and state withholding. Choose a payroll provider (Gusto, ADP, Paychex, QuickBooks Payroll, OnPay, etc.). Have the new employee complete Form W-4 (federal withholding), Form I-9 (employment eligibility), state withholding form, and direct deposit authorization.
Each paycheck
Withhold federal income tax (W-4 driven), employee FICA (7.65%), state income tax, and any other authorized deductions. Calculate employer FICA (matching 7.65%), FUTA (effective 0.6%), state unemployment (varies), and any state-mandated benefit assessments.
Deposit schedule
Federal employment tax deposits are made through EFTPS on either a monthly or semi-weekly schedule based on lookback-period liability. Most small employers are monthly depositors. Late deposits trigger penalties of 2% to 15% depending on lateness.
Quarterly and annual returns
Form 941 (or annual 944) reports quarterly federal employment taxes. Form 940 reports annual FUTA. State returns vary. W-2s and W-3 are due January 31. Payroll providers handle the filings automatically.
Worker classification first
Before you "hire your first employee," confirm the person is genuinely an employee under the IRS common-law test. If they could be a legitimate independent contractor, the contractor structure avoids most of the payroll-tax compliance burden — but only if the relationship truly supports contractor classification.
When to bring in a professional
DIY tax software handles most small-business returns competently, but a handful of situations reliably justify a CPA or enrolled agent: an entity formation or election, a multi-state filing situation, a significant fixed-asset purchase that triggers Section 179 or bonus depreciation modeling, a retirement-plan setup, an IRS notice or examination, and the year of an entity sale. Outside those situations, software plus an annual half-day of personal review produces a defensible return. The cheapest professional engagement is a one-hour consultation rather than a full-service tax-prep relationship.
Where the IRS publishes guidance on this topic
The IRS publishes a layered set of free resources on most small-business tax topics: a relevant publication (usually one of Pub 334, 463, 535, 587, 946, 560, or 583), the instructions to the relevant form, the "Small Business and Self-Employed Tax Center" landing pages on IRS.gov, and the Audit Techniques Guides written for IRS examiners. Reading the agency's own materials is the cheapest tax education available. They are written in plain English, updated annually, and they reflect exactly the framework an examiner will apply if your return is selected.