Just the mention of a workers’ compensation audit can stir up the butterflies in your stomach and add a serious dose of stress to your existence.
But, if you are scheduled for an audit, there is no need to dread it. A small amount of preparation and common sense can save you a lot of aggravation and money.
Devoting a few hours of effort now can save you a lot of time in the future. Give your full attention to the auditor and remain with them throughout the entire process. The process may take a couple of hours to complete, so make sure that the time and date of the scheduled audit are convenient for you. Call to reschedule the audit if it has been scheduled at an inopportune time.
As soon as you learn about the audit, begin to collect and organize:
Overtime payroll records,
Classification divisions, and
This should give you plenty of time to compose a summary of each, which will help you to better communicate important data during the audit process. Information that is well organized will also expedite the process. If you can reconcile your calculations to payroll records, such as W2s and payroll stubs, the auditor might be more comfortable trusting your data.
You will also want to make any needed adjustment to payrolls; for example, subtracting bonus pay from overtime pay.
If applicable, you will need to apply the maximum and minimum payrolls to the calculations. This part may take a little research, since the minimum and maximum will vary based on state, career, and even among sole proprietors, partners and executive officers.
Classification and subcontractors
Before the audit, review the different employee job classifications and make sure that each person is correctly classified.
This is a key element to ensure that the audit flows smoothly. If there’s any question about how to classify an employee, call us. The auditor is most likely going to ask you about the classification and job duties for multiple different employees, so be prepared and armed with knowledge.
One last important preparation concerns subcontractors. Payments issued to subcontractors can go against your workers’ compensation in the event that the subcontractor did not have a certificate of workers’ compensation.
You can get a copy of the certificate, but make sure that it is current and shows coverage during the time the subcontractor worked for you.
Once the audit arrives, you’ll be glad that you took a little time collecting, organizing and summarizing your information. You will also find that the auditor is not a nemesis, especially when you provide honest answers and organized paperwork.
At the conclusion of the audit, ask the auditor for the audit worksheet. Then ask us to review the accuracy of the final audit.
You have a legal right to ask for a corrected audit anytime you think there were any errors. If any overpayment was made under the last three preceding audits, you also have a legal right to recover it.