If you own a business, you know how important it is to have workers’ compensation insurance to protect both you and your employees. In fact, it’s generally required that you have this type of insurance. But this type of insurance can seem complicated, because there are a lot of rules and regulations surrounding it. For example, you might have to undergo an annual audit of your payroll to make sure you are accurately reporting it. This audit is nothing to worry about, but it is important to understand how it works, because you could end up owing money if you estimate your payroll incorrectly.
What Are the Compliance Standards?
When you first purchase workers’ compensation insurance, your initial premium will be based on your estimated payroll. In fact, your total payroll is a major part of the formula for determining your premium. But at the end of the year, your insurer will conduct a workers compensation audit, and you will need to provide them with your actual payroll numbers, including casual labor and uninsured subcontractors.
If you refuse to partake in this audit and don’t provide the required information, your insurance carrier will most likely estimate your payroll as higher than it is, and you will have to pay the difference in your premiums. If you don’t pay the estimated additional cost, your policy will be canceled, and the Department of Industrial Accidents could issue a stop-work order on your business.
Preparing for Your Workers Compensation Audit
To prepare for your annual audit, you should have the following information ready:
- Payroll records
- Federal 941 tax returns (most recent four quarters)
- 1099 tax forms
- Federal tax return including Profit & Loss section (1040 Schedule C, etc.)
- General ledger or checkbook
- Certificates of insurance from subcontractors
Once you have provided all of this information, you will receive a final audit report from the insurance company. And if your business owes money, you do have the option of disputing your insurer’s findings. If you do this, the payment due date will be suspended until the dispute is settled.
Looking for a Plan?
Workers’ comp is a very valuable and necessary type of insurance for all business owners. It protects the workforce that you rely on and care about. And it protects all the hard work that you’ve put into building your business. But, like all insurance policies, it has its limits, and all employers and employees should be aware of what is covered and what is not. You also need to be aware of all of the regulations surrounding your commercial insurance policies.
If you need any help with coverage for your business, EZ.Insure is here to help. We’ll get you instant quotes and set you up with your own dedicated agent – for free! You’ll get all of your questions answered and get the most accurate quotes. You have enough on your plate, so let us take care of your insurance needs. To get started simply enter your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.