Final answer:
Workers' compensation benefits Bob receives are exempt from Employee/employer Social Security and Medicare taxes. These benefits are not generally taxable at the federal level, which aligns with option A as the correct answer for the provided choices.
Step-by-step explanation:
Bob, who has been injured on the job and is receiving workers' compensation benefits, is concerned with the tax exemptions these benefits may have. Workers' compensation benefits are generally exempt from certain taxes, often being considered non-taxable as they serve as a replacement for regular wages. It is important to understand that while workers' compensation benefits are not subject to federal income tax, each state may have different rules regarding the taxation of these benefits.
Typically, workers' compensation benefits are exempt from:
- Employee/employer contributions to Social Security (EE/ER SS) and Medicare (Medi) taxes.
- Worker's compensation insurance, where employers pay into state-run funds to cover
- benefits for job-related injuries.
If we look at the options provided, we're looking for a choice that suggests exemptions from certain taxes. Not all employment tax and withholdings are excluded, but rather specific types. Given this, the correct answer is that these benefit payments are exempt from Employee/employer Social Security and Medicare taxes, making option A the correct choice.