A friend approaches you with his first paycheck. He is confused to see that money was taken away from his check by the federal government for several programs. Explain the concept of payroll taxes to him, including how it works and where the money goes.

The taxes that are collected by federal, state and local governments are known as payroll taxes. The deduction depends on the wages of employees. It is mandatory to withhold the taxes by all the businesses that have employees, it is remitted on monthly or weekly basis. The businesses are also required to submit reports to the Internal Revenue Services or to state and local taxing agencies. The self employed persons are required to pay their own taxes while the businesses are not required to withhold the taxes on the wages of their employees. Payroll taxes go into the government's general fund and is used for Social Security and Medicare.