Final answer:
The payroll register is used to record employee compensation and withholdings. Payroll software can assist in managing this process, while payroll taxes refer to the actual taxes collected, not the record of compensation and withholdings.
Step-by-step explanation:
What is used to record employee compensation when a business has to pay wages as well as withhold federal and state taxes? The correct answer is B) Payroll register. A payroll register is a document that records an employee's pay and deductions. This register typically keeps track of gross wages, the various taxes withheld, such as federal and state income taxes, Social Security contributions, Medicare, and other deductions like health insurance and retirement plans. Payroll software is also a tool often used to manage and streamline the process of recording employee compensation and calculating withholdings, although it is not the record itself.
The term payroll taxes refers to the taxes themselves that are comprised of deductions from an employee's wages as well as taxes paid by the employer.
It is essential for businesses to accurately record and report employee compensation to comply with governmental regulations and provide proper documentation for tax purposes. Employers are required to make these payments and reporting on a regular basis, which can be quarterly or annually, depending on jurisdictional regulations.