Workers’ Compensation Audit Guide for Tax Professionals (New York)

Workers’ Compensation Audit Checklist

Use this checklist when helping a client prepare for a New York Workers’ Compensation audit.

Business Information

• Business legal name and EIN
• Business address and locations
• Description of business operations
• Workers’ Compensation policy number

Payroll Documentation

Auditors verify payroll numbers against tax filings.

Required documents:

• Payroll register for the audit period
• Quarterly payroll tax filings (Form 941)
• Annual payroll reports (W-2 and W-3)
• State unemployment filings (NYS-45)
• Payroll summaries by employee
• Overtime reports

Important:
Overtime pay usually has special treatment in workers’ comp calculations.

Accounting Records

Auditors cross-reference payroll with financial records.

Provide:

• General ledger
• Profit and Loss statement
• Cash disbursement journal
• Check register
• Bank statements

These documents help auditors identify:

• Cash payroll
• Contractor payments
• Undocumented labor costs

Employee Information

Prepare documentation for each employee:

• Job title
• Job duties
• Department
• Payroll totals

Workers’ compensation premiums depend heavily on classification codes.

Example:

Misclassification is one of the most common audit findings.

Independent Contractor Documentation

If your client used subcontractors, gather:

• Certificates of Workers’ Compensation insurance
• Contracts with subcontractors
• Form 1099-NEC issued
• Proof of liability insurance

⚠️ Important:
If a subcontractor does not have workers’ comp coverage, the insurer may treat them as employees and add their payments to payroll.

This can significantly increase the premium.