What am I doing wrong and how to fix this?
You are defining the function inside another function, i.e. the function is not defined in global scope and hence cannot be found by the inline event handler.
Just remove $(document).ready(function() { because you don't need it there:
function myFunction(){
$('#mycheckboxdiv').toggle();
$("div#headersteptwo").addClass("hidden");
}
You only have to use $(document).ready(function() { ... }); if you manipulate the DOM, and also only if you place the script before the elements in the HTML document.
The better solution of course would be to bind the event handler with jQuery (and not use inline event handlers):
$(document).ready(function() {
$('button').on('click', function(){
$('#mycheckboxdiv').toggle();
$("div#headersteptwo").addClass("hidden");
});
});
You might have to add a class or ID to the button to make the selector more specific. Have a look at the list of available selectors.
window.myFunction = function () { alert('It works now'); }