Workers Compensation Premiums = Tax?
We often hear that Workers Compensation premiums are just part of doing business. Would premiums then be the same as a tax? The final answer is no. I thought I would list a few of the similarities and differences.
The following are similarities between Workers Compensation premiums and payroll taxes – they are both:
- Based on wages
- Subject to audit
- Require excellent record keeping
- Controlled by an outside party (IRS, Insurer, Rating Bureau, Department of Insurance)
- Complex in nature
- Three-year window for questions or disputes
- Almost all Workers Comp policies are audited, less than 2% of all taxes are audited
- You can shop and compare policy pricing, not taxes
- Payroll taxes have very few inputs to the calculations, Workers Comp premiums have many more variables
- Some of the variables that go into Workers Comp premiums and audits are more of an opinion than taxes (Class Codes, etc)
The bottom line is that Workers they are are not just part of doing business like taxes. Worker’s Compensation was never designed to just be a component of doing business. Do not just write a check as if you are paying for the electric bill. Participate in the Worker’s Compensation audit process by reviewing everything that crosses your desk from before the policy is signed until the final audit bill arrives usually 30 days after your premium audit.
If you feel something is wrong with your Workers Comp policies or audits, look them over very closely. Stop just writing checks is one of our old mottoes. The Workers Comp bill you receive is not just part of doing business. Check out how they figures were arrived at before paying the bill, especially in this economy.
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