First thing you need to do is get with the IRS as an Employer. This can be done almost instantly at http://www.irs.ustreas.gov/businesses/index.html. You can download in .ptf format about anything you want. Or, you can ask them to mail you Pub 15 and related info.

Not only will you be subject to withholing taxes, but social security and medicare. And, in most cases, unemployment taxes, but state and federal. Also, if you are in a state with income taxes, you will be subject to them, as well.

This can be a bother and a pain in the butt for someone who would rather spend time doing what they do to earn in the first place. While you'll still have to register with both federal and state, you might want to find a local small business bookkeeper who will handle all the detail for you. It's not hard, and with one employee, not a lot of time, but it can be "hired out".

Most bookkeepers will guarantee what they do an pay any penalties that they may cause. Biggest problem in it all is meeting filing and depositing deadlines, sometimes overlooked by someone "on a mission."