Do I have to provide a workers compensation auditor with my tax records?

I recently wrote about the intrusive nature of the workers comp audit process and how some employers feel the process is stacked against them. Well, I just got off the phone with another employer who asked this question! Be sure to check out my recent post of documents required at audit and helpful audit tips!

This employer was concerned that the insurance company was asking for too much information and that they would somehow use that information against him. Paranoid, maybe a little, but concerned about the amount and type of information the auditor was requesting.

Here’s a short list of the type of information the auditor can and will ask for:

  • Payroll Records; Records must document the actual gross payroll by each employee. Do not estimate employee payrolls. Records should indicate the monthly, quarterly and year to date totals for each employee broken down by job function or department. It’s always good to show the type of work each employee performs and their specific job duties. For employers who compensate by cash, be prepared to provide a copy of your check register and/or your cash journal.
  • Overtime; Payroll records must include any payments made to employees for overtime. The auditor must be able to discount the overtime pay back to normal time and include the normal time rate in payroll. This is allowed in most states.
  • Ownership; Payroll records should also include Sole Proprietor, Partner, LLC Member and Corporate Officer compensation. Inclusion and exclusion from coverage for owners should also be indicated in the records provided.
  • Payroll Record Verification; Tax forms are used to verify the payroll information provided to the auditor. They will require you provide 941’s, 940, W-3, Completed Unemployment Tax Forms and/or a copy of Schedule C from your 1040 along with copies of 1099’s. 
  • Certificates of Insurance; Maintain up to date certificates of insurance on all 1099 independent contractors or subcontractors used. Make sure the certificates indicate coverage for the time period they performed work for you and were paid.

Yes! An auditor can require you provide them copies of your tax documentation! As you can see from the list above, these items are used as payroll verification.

If you’re having a problem with a workers comp audit, be sure to seek out the help of an independent workers comp premium consultant. There’s a few good firms out there who can assist you through problems you may encounter with the audit process.

Hope this helps out! Thanks!