Payroll taxes are the state and federal taxes that you, as an employer, are required to withhold and/or to pay on behalf of your employees. You are required to withhold state and federal income taxes as well as social security and Medicare taxes from your employees' wages. You are also required to pay a matching amount of social security and Medicare taxes for your employees and to pay State and Federal unemployment tax.

Have each new employee complete IRS form W-4. You will use this form to calculate the amount of federal income tax to withhold from the employee's wages. Most of the states have income tax structures that are based on the federal system, so you will use the W-4 to calculate the amount of state income tax to withhold as well.