What are payroll taxes?

Payroll taxes refer specifically to the taxes that employers are required to withhold from their employees' wages and to pay on behalf of their employees. These taxes primarily fund social security, Medicare, and unemployment insurance. This means that when an employee receives their paycheck, a portion of their earnings is withheld for these taxes, and the employer also contributes additional amounts based on the employees' wages.

Option C accurately describes this relationship, emphasizing the role of the business (employer) in managing and remitting these taxes as part of their obligations to the government concerning their employees' payroll. Understanding this function is crucial because payroll taxes impact both the employer’s costs and the employee’s net take-home pay.

In contrast, the other options reflect different kinds of taxes. Taxes on profits earned by the business pertain to corporate income tax, not payroll tax. Taxes paid out of the owner's income are more aligned with personal income taxes rather than payroll taxes specific to employee compensation. Taxes on business assets owned typically relate to property taxes or asset taxes, which are also outside the scope of payroll taxes. Therefore, recognizing the precise definition of payroll taxes helps clarify the responsibilities of employers towards their workforce and the government.