How to Prepare for Workers’ Comp Audits in 4 Steps [+Checklist]

1. Schedule Your Workers’ Comp Audit

Other Types of Workers’ Comp Audits

2. Gather Your Records

  • Description of company operations
  • Job descriptions for each employee
  • Number of employees at each location
  • Owners/officers names and titles
  • Description of work performed by contractors and subcontractors
  • Accounting ledger
  • Payroll journal or register
  • Business checkbook
  • Federal Profit and Loss From Business Schedule C (Form 1040)*
  • Federal Employer’s Quarterly Tax Return (Form 941)
  • Federal Employer’s Annual Tax Return (Form 944)
  • Federal Employer’s Annual Unemployment (FUTA) Tax Return (Form 940)
  • Federal 1099, W-2, and W-3 transmittals
  • State unemployment insurance tax reports (forms vary by state)
  • Time cards or number of hours, days, and weeks worked annually
  • Overtime payroll records
  • Payments made to subcontractors
  • Payments made to independent contractors
  • Payments made to casual laborers
  • Receipts for materials purchased
  • Subcontractors’ certificates of insurance
  • Business’ experience modification worksheet

What Is Included in Payroll

  • Gross wages and salaries
  • Total commissions
  • Bonuses
  • Pay for overtime, holiday, vacation, and sick days
  • Employee contributions to 401(k)s, savings plans, and individual retirement accounts (IRAs)
  • Payments based on something other than time worked
  • Payments you make that would otherwise be the responsibility of the employee like Social Security
  • Payments or allowances for hand tools or power tools employees use for work
  • Lodging and meals included as part of an employee’s pay

What Is Excluded From Payroll

  • Tips and gratuities
  • Employer payments to group insurance
  • Severance pay
  • Reimbursed business expenses
  • Special rewards for individual invention or discovery
  • Active military duty pay
  • Uniform allowances
  • Employee discounts on goods and services

Are All Salaries Included in a Workers’ Comp Audit?

3. Update Your Job Descriptions

Why Job Descriptions Matter in a Workers’ Comp Audit

4. Review the Auditor’s Work

How to Dispute a Workers’ Comp Audit

Common Mistakes in Workers’ Compensation Audits

  • Including items in payroll that shouldn’t be there
  • Using the wrong class codes for employees
  • Changing your experience modifier
  • Charging for an insured subcontractor
  • Including exempt workers in the payroll

How to Make a Workers’ Comp Audit Easier

Workers’ Comp Audit Frequently Asked Questions (FAQs)

Am I required to undergo a workers’ comp audit?

What happens if I don’t comply with a workers’ compensation audit?

What if I can’t afford the retroactive premium audit bill?

Bottom Line




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Shamim Ahammed

Shamim Ahammed

Forty percents marketers+Forty percents designer+Twenty percent's writer= dudes; It’s me😎

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