BWC Audits: Should I Be Worried?
Each year the Ohio Bureau of Workers Compensation (BWC) randomly selects employers to audit to verify that employers are properly classified according to their business operations and to make sure payrolls are accurately reported with the correct premium being paid. Audits are conducted at the employer’s place of operation, an accountant’s office, or at a local BWC customer service office. Typically an audit takes about two hours to complete, however, this may vary depending on the complexity of the audit.
If you have not reviewed your classifications recently, if you feel you may be classified incorrectly, or if the nature of your business has changed, it’s important for you to update your reporting now. Errors can cause significant expense to your business. You can contact the BWC for correct code or contact Kirsch CPA Group and our team will use our experience to insure your classifications are correct.
The audit will cover at least two semiannual reporting periods. The records normally required include:
- Payroll records
- Semiannual BWC payroll reports and backup worksheets
- Internal Revenue Service (IRS) forms (940, 941, 1099, W-2 and W-3), returns and attachments
- Quarterly Ohio Department of Job and Family Services reports
- Other records, including business contracts and records documenting business operations
What Is the BWC Auditor Looking For?
A BWC auditor reviews employer records for the last two to four semi-annual reporting periods to confirm that the employer accurately reported all wages to the proper classification and computed all premiums correctly.
Employer operations are also reviewed to ensure that the employer is properly classified.
Typical Audit Questions
- Are the payroll numbers reported to Ohio Department of Job and Family Services and the IRS the same as the numbers reported to the BWC?
- Does the employer need additional classifications?
- Is each employee’s payroll reported under the correct classification?
- Has the construction workers cap been applied correctly?
- Are there additional payments or benefits provided to employees that should be included in the payroll reported to the BWC?
- Are 1099 recipients independent contractors, or are they, employees?
- Verification of the type of entity, corporation, LLC, partnership, etc.) Is the payroll for officers/partners/sole proprietors reported correctly?
- Is casual labor payroll reported?
Roughly one-third of the time the audit will produce no findings, which means the employer is properly classified and the appropriate premiums have been paid. However, if an employer is found to owe additional premiums, an invoice will be sent for the additional amount due. If an employer has paid too much in premiums, the employer’s account will be credited.
Common Employer Errors
The Ohio Bureau of Workers Compensation reports that the common errors that an audit would reveal include:
- Failing to follow the maximum and minimum reporting requirements for corporate officers and sole proprietors and partners who elect coverage: be sure to check the semiannual payroll report for these amounts
- Incorrect reporting of clerical employees: in order to qualify for this classification, these employees must spend 10% of their work time in a physically separated, clerical work area; they cannot have any duties in the business’ operations
- Incorrect reporting of specific types of remuneration: as a general rule, the BWC follows the same guidelines as state and federal unemployment with a few exceptions, specifically personal use of autos, 125 plan contributions, health insurance premiums and group term life insurance premiums
- Incorrect manual classifications assigned to your policy
Get Help from Kirsch
The Kirsch CPA Group has recently attended BWC audits with our clients to bring clarification for the auditor and minimize changes that are detrimental. If you have questions or receive an audit notification, contact us and we can help you manage the audit process.