An EIN (Employer Identification Number) is your business's federal tax ID — required for all employers, most LLCs, and any business that files business tax returns separately from the owner. Apply free at IRS.gov/ein and receive your EIN immediately upon completing the online application. You need your EIN to open a business bank account, hire employees, set up payroll, apply for business licenses, and establish credit in your business name.

Employers pay the Federal Unemployment Tax Act (FUTA) tax at 6% on the first $7,000 of each employee's wages per year — but receive a credit of up to 5.4% for timely state unemployment tax payments, reducing the effective federal rate to just 0.6%. FUTA payments are due quarterly when liability exceeds $500; form 940 is filed annually. This is an employer-only tax — never withhold it from employee paychecks.

Employers withhold Social Security (6.2%) and Medicare (1.45%) from employee wages and match those amounts themselves — a total employer cost of 7.65% of each employee's wages on top of their stated salary. An employee earning $50,000 means you pay an additional $3,825 in FICA taxes beyond their salary. Factor this "payroll burden" into your true labor cost calculations — it is often overlooked when budgeting for first hires.

You must deposit withheld income taxes and FICA taxes with the IRS either semi-weekly (if your total payroll tax liability exceeded $50,000 in the prior year) or monthly (if liability was under $50,000). New employers use the monthly deposit schedule. Penalties for late deposits range from 2-15% of the amount due — these are assessed automatically by the IRS and are among the most common and expensive compliance mistakes for new employers.