Intuit Academy Tax Practice Exam

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Enhance your tax skills with the Intuit Academy Tax Exam. Access multiple choice quizzes and detailed explanations. Prepare effectively and excel in your exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

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For Taxpayer A and B, with an adjusted gross income of $99,650, do they need to include $4,200 of workers compensation benefits in taxable income?

Yes, it must be included
No, it does not need to be included
Yes, but only partially
No, unless other income is claimed

The correct answer is: No, it does not need to be included

Workers' compensation benefits are generally not subject to federal income tax. This tax-exempt status applies regardless of the taxpayer's adjusted gross income. In the case of Taxpayer A and B, the $4,200 received in workers' compensation benefits should not be included in their taxable income. The key principle is that these benefits are designed to replace lost wages due to work-related injuries or illnesses, and the purpose of workers' compensation is to provide financial support to injured workers without the tax burden. Therefore, the correct choice indicates that the benefits do not need to be included in taxable income at all, reinforcing the non-taxable nature of such compensation.