Helping Prevent Audits
The first three months of each year finds us scrambling to gather information for the Internal Revenue Service, the goal being for us to report with accuracy and not attract an audit from the IRS. Workers compensation clients face an audit every year. For many clients, this is as mentally daunting as hearing from the IRS.
Workers compensation audits should not be that stressful. Like everything in life, preparation and planning are key factors in reducing stress when dealing with financial information. The annual payroll audit required for workers compensation policies can be a benefit to the client. Preparation for a workers compensation audit should start the minute a policy is issued - not when it is ready to expire.
Insurance agents can provide valuable guidance in the audit process. The client needs to know what they are required to report. For example, did you know that uninsured subcontractors may be considered as payroll employees when certain factors exist? This one piece of the payroll report has become a tremendous audit problem and takes many insureds by surprise. Gross workers compensation payroll may not be the same as payroll reported for taxes. Bonuses, vacation pay profit sharing, 401K, and other benefit plans are common items used as payroll for workers compensation audits that are easy to not consider when estimating the payroll on a policy for the future. If employers are aware of the many items to consider at the inception of the policy, the expiration of the policy is not nearly as shocking.Share on Facebook Share on LinkedIn
Posted by Betty Douglas, CIC, AAI, Workers Compensation on Feb 12, 2020