Which of the following statements about payments made under workers' compensation benefits is FALSE?

Comprehensive and Detailed Explanation:

Workers' compensation benefits are NOT subject to FUTA (Federal Unemployment Tax Act) as long as

they are paid under a workers' compensation law.

Option A (Not included in gross income) is correct because workers' compensation is tax-exempt

under IRS rules.

Option B (Received for work-related injuries/illnesses) is correct because these payments replace lost

wages due to job-related incidents.

Option D (Not subject to FICA under state laws) is correct because workers' compensation payments

are exempt from Social Security & Medicare taxes if they are made under a state-approved program.

Option C is incorrect because workers' compensation payments are NOT subject to FUTA, regardless

of the amount paid.

Reference:

IRS Publication 525 – Taxability of Workers’ Compensation

Payroll.org – Payroll Taxation of Disability and Workers' Compensation Benefits