Final answer:
A company recording FICA, federal income, and state income taxes payable is an example of recording withholdings from employee wages to pay taxes. Payroll taxes involve both employee deductions and employer-paid taxes, which must be remitted to tax authorities.
Step-by-step explanation:
When a company records FICA taxes payable, federal income taxes payable, and state income taxes payable, it is an example of a company recording required withholdings from wages to pay various governmental authorities and other parties. These withholdings are necessary for the company to comply with the legal requirements concerning payroll taxes.
Payroll taxes are a combination of taxes that entail both deductions from an employee's gross wages and taxes that are paid directly by the employer. These deductions include federal and state income taxes and contributions to social security and other insurance programs (e.g., unemployment and disability), which form part of the FICA - Federal Insurance Contributions Act - withholdings. The employer is responsible for reporting and paying these taxes to the relevant tax authorities on a quarterly and annual basis, with electronic reporting commonly mandated.
The process helps fund government operations and services, with personal income tax serving as a significant source of federal government revenue. By withholding these taxes, employers contribute to the smooth operation of the tax system, ensuring that employees have paid their taxes across the year through payroll deductions.