Your Worker’s Comp Audit Survival Guide

Going through a worker’s compensation audit can be a pain, especially when you’re unprepared.

This quick guide will help you gather everything you need for your upcoming audit so you can get through it as smoothly as possible.

What is a Worker’s Comp Audit?

The purpose of a worker’s compensation audit is to make sure you’re paying the right amount for coverage based on your payroll and company type.

When you first set up your worker’s compensation insurance coverage, you’ll have to estimate what your payroll will be for the following year. Then, once the insurance coverage period is over, an auditor will analyze your payroll and determine whether you paid enough, too much, or not enough.

If your estimates were accurate, you could end up with the same coverage. If your calculations were low, your premium will go up. If they were high, your premium will be lower.

A worker’s comp audit will also evaluate the classification codes of your employees and business to ensure that everyone has adequate coverage based on their job requirements.

If you get contacted about an audit, it doesn’t mean you’ve done something wrong. Most states require an annual worker’s comp audit.

What You’ll Need for A Worker’s Comp Audit

There are two types of worker’s compensation audits–physical and voluntary.

During a physical audit, someone from the insurance company will visit your headquarters in-person to perform the audit.

During a voluntary audit, you’ll supply the required information via phone or a digital platform.

Regardless of what type of audit you’re doing, your auditor will request several critical pieces of information:

Payroll information

The most important part of a worker’s compensation audit is your payroll records. This includes overtime payments, federal and state tax returns, unemployment tax reports, and payroll summaries for W2 and 1099 employees.

Certificates of insurance for all relevant parties

Gather certificates of insurance for your subcontractors and yourself. If any of your contractors aren’t insured, they’ll likely get added to your payroll.

Employee records

Gather all information about your employees, including their job roles, how much time they’ve worked, how many employees you have, and form 941.

Business operations information

You’ll need to demonstrate what your business does so your auditor can correctly classify it. You’ll also need records of company ownership.

Cash distribution records

Gather records of everything paid for in cash, including supplies and labor.

Tips for Getting Through An Audit

Once the above information is gathered, follow these steps to ensure a smooth audit.

1. Make sure everything’s accurate

Do not, under any circumstances, knowingly falsify information during your audit. You could face severe penalties, including hefty fines and policy cancellation.

2. Get information ready ahead of time

The more information you can present at the time of your audit, the smoother it will go. Therefore, it’s a good idea to get ahead of your audit by getting organized early.

3. Update your records as needed

Keep track of payroll, business, and employee records changes throughout the year. This will make it easier to recognize whether you should expect an increase in your premium.

If you feel unprepared for your upcoming audit, don’t worry. You don’t have to go through it alone!

I can help you organize paperwork for your upcoming worker’s comp audit and keep you organized for next year’s (and beyond). Click the “Contact Us” button below or call 828-279-8213 to learn more.


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