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Seven Tips for Navigating a Workers Comp Audit


Aworkers’ compensationaudit is a review of records at the end of the year. The purpose of this audit is to ensure you have paid the correct workers’ compensation insurance premium. The auditor may conduct the audit by mail, phone, or in-person, depending on the business type.

What happens if you fail a work audit?

Generally, if you fail an audit, you get hit with a bigger tax bill. The IRS finds that you didn't pay the correct amount of taxes so it utilizes the audit to recover them. In addition to penalties, you're required to pay the additional taxes as well as the interest on those taxes.

The insurance company has hundreds of rates based on this classification and its risk factors. Spending some time preparing for your next workers’ compensation audit is a worthwhile investment. With workers’ comp being one of your biggest expenses, you should not be paying any more than you need too, especially due to a small mistake. Once the insurance companies have completed their review, findings will be presented in the form of adjusted premiums.

How to Avoid Audit Surprises

Your insurance provider uses payroll data to determine your premium. During the workers’ comp audit, your provider adjusts your premium if your company now looks different. If your codes aren’t accurate, you might end up overpaying for workers’ comp insurance or be penalized for underreporting your risk.


The work needed during the year may be more than expected, or unforeseen circumstances might reduce your actual payroll compared to the estimate. Therefore, most state regulators require an annual audit so that appropriate adjustments to the initial premium can be made. A workers’ comp audit by your insurer is common for most mid-sized or larger employers, and the audit threshold in California is $16,000 or more in annual premium.

How To Prepare For Your Workers Comp Audit

Payroll Reports from every check date between your policy’s effective dates.Summary reports are the best way to go – they have the same information and help reduce the amount of paperwork. Apex knocked down our experience mods by a combined 26.8 points and that translated to over $57,000 in return premiums. You make it easy for any company to obtain workers’ comp refunds. Apex Services provided a valuable service of auditing and recovering $124,000 in premium refunds to date. Review the audit billing statement and compare it to your original policy. These sorts of extreme assessments of your workplace are all too common in these litigations.

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In a Workers Comp Audit comp insurance audit, an auditor reviews your records to calculate your total payroll for the policy period. Some individuals’ pay may be exempt or subject to payroll minimums and maximums if they are owners or officers. The cost of workers’ compensation insurance is quoted based on your estimate of your company’s payroll. There are two types of workers compensation audits performed.

Why is a workers’ comp audit needed?

Some Insurers Step Up Group Health Plan Assistance Some health insurers are helping workers who would otherwise lose health insurance maintain employee benefits during the COVID-19 pandemic, a … Make sure the Schedule Credit or Debit have not changed from the original policy. You may dispute any additional premiums that have occurred due to the change in Schedule Credit or Debit. Make sure that the auditor can easily recognize and distinguish overtime pay and is able to discount it back to normal pay, which will allow you to get significant savings.

  • Contact one of our Audit Specialists today for a free audit review for your policy.
  • A workers comp audit is an annual review of records at the request of an insurance company.
  • Your auditor will walk you through the process and forms, and can answer any questions you have.
  • Our goal is to ensure accurate payroll reporting, which determines the premium you pay.

Typically, workers’ comp audits happen annually or when you cancel your workers’ comp policy. Most of the time, you can complete your audit over the phone and online. However, some insurance companies and states may require a physical audit instead. Workers’ compensation policy premiums are based on several factors, but the biggest is the size of your total payroll. When you apply for a workers’ comp insurance policy, you tell the insurer how much you expect to pay your employees during the upcoming year and what kinds of jobs you think they’ll be doing.

Severance pay can also be excluded from audit calculations except accrued payments for commission, bonuses, vacation and sick pay. They’re mandatory when you have a workers’ compensation policy. A premium audit is a review of an employer’s business operations and worker duties, and an examination of payroll books and accounting records. Oregon Administrative Rules require insurers to investigate all possible sources of employee earnings, including payments to uninsured contract employment.

What happens if you refuse an audit?

Here's what happens if you ignore an office audit:

You may have avoided the meeting, but you'll pay for it later in taxes, penalties, and interest. The IRS will change your return, send a 90-day letter, and eventually start collecting on your tax bill. You'll also waive your appeal rights within the IRS.

You can compare quotes from top-rated U.S. carriers with Insureon’s free online application. If the audit found that your policy premium was too low, you’ll have to pay the difference in premium. Your insurance company will likely give you some time to make the additional premium payment. Buy workers compensation insurance from trusted experts who will help you quote your coverage and manage your policy better. An examination of the insured’s payroll and tax records by a representative of the insurance company.

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