Payroll Taxes
All employers are required to withhold taxes from employees’ paychecks and then send those funds to the proper government agencies.  The employer also has to pay certain taxes like FICA, federal unemployment, and state unemployment taxes.  The employer also has to withhold social security and Medicare taxes from employees’ wages and pay a matching amount.  You can visit the Social Security Administration’s Web site to find out about the five major benefits covered by Social Security taxes (retirement, disability, family benefits, survivors, and Medicare). 

The IRS assigns employers, sole proprietors, corporations, partnerships, nonprofit associations, and other business entities a nine-digit Employer Identification Number, also known as an EIN or Federal Tax ID number.  If you form a C or S corporation, pay wages to at least one employee, or file pension or excise tax returns, you will have complete IRS Form SS-4 and get an EIN.  If you have a sole proprietorship with no employees, no pension plans, and no excise taxes, you will not have to get an EIN, but the sole proprietorship itself can use the social security number for income tax, self-employment, and other tax purposes.  Contact the IRS and get their publication, Understanding Your EIN, if you need further explanation.