Which of the following statements about payroll taxes is true?

• A. Employers are not required to withhold federal income tax from employees' wages.
• B. Only employees are responsible for paying federal unemployment (FUTA) taxes.
• C. Both employees and employers are required to pay Social Security and Medicare taxes.
• D. Payroll taxes are only paid once a year, at the end of the fiscal year.

Answer: (C)

Verified step by step guidance

1. Understand the concept of payroll taxes: Payroll taxes are taxes imposed on employers and employees, and they include Social Security, Medicare, federal income tax withholding, and federal unemployment taxes (FUTA). These taxes are typically calculated and paid periodically, not just once a year.
2. Clarify the employer's responsibility for federal income tax withholding: Employers are required to withhold federal income tax from employees' wages based on the information provided by employees on their W-4 forms. This withholding ensures that employees pay their income taxes throughout the year.
3. Explain the responsibility for federal unemployment (FUTA) taxes: FUTA taxes are paid solely by employers, not employees. These taxes fund unemployment benefits for workers who lose their jobs.
4. Discuss Social Security and Medicare taxes: Both employees and employers are required to pay Social Security and Medicare taxes. Employers match the amount withheld from employees' wages for these taxes, contributing an equal share.
5. Address the frequency of payroll tax payments: Payroll taxes are not paid only once a year. Employers are required to deposit payroll taxes periodically, typically on a monthly, semi-weekly, or quarterly basis, depending on the size of their payroll and IRS regulations.