# Workman's Comp Insurance Audit



## KAG (Jul 19, 2007)

Got a phone call from my old Workman's Comp insurance company telling me I was randomly selected to be audited. They want to set up a face to face audit time and want me to turn over all my business financial records for 2008. The policy in question expired a month ago and I now use a different company. 

I told them no, that I thought workman's comp is based off of wages paid and I can turn over just the copies of W-2's of my employees for the time the policy I had with them was in effect and mail them in but I did not see why it had to be face to face.

They said it was to see if I was due a refund on my premium I paid but I know its to see if they think I owe them more now that I did not re-up with them.

Anyone have any experience with this?


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## JDiepstra (Sep 15, 2008)

No experience but sounds like a fishy deal for sure. Insurance companies are hurting bad right now and my butt they are trying to give out extra money!


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## drivewaydoctor (Nov 26, 2008)

I don't know about workman's comp but I know that here Revenue Canada can come in and audit anytime they want without your OK. I highly doubt workman's comp can do this though. I'd call them and ask for a manager and discuss it.


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## JDiepstra (Sep 15, 2008)

drivewaydoctor;703239 said:


> I don't know about workman's comp but I know that here Revenue Canada can come in and audit anytime they want without your OK. I highly doubt workman's comp can do this though. I'd call them and ask for a manager and discuss it.


What is Revenue Canada? Like the IRS in USA? A gov agency?


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## WMHLC (Jul 31, 2005)

It's no big deal. My insurance company does it every year. They just check to make sure you have enough coverage. If you have to much they will mail you back a check for over payment.


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## drivewaydoctor (Nov 26, 2008)

JDiepstra;703241 said:


> What is Revenue Canada? Like the IRS in USA? A gov agency?


Sorry its the same as your IRS. They regulate all of our paid and unpaid taxes.


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## Camden (Mar 10, 2007)

KAG;703229 said:


> Got a phone call from my old Workman's Comp insurance company telling me I was randomly selected to be audited. They want to set up a face to face audit time and want me to turn over all my business financial records for 2008. The policy in question expired a month ago and I now use a different company.
> 
> I told them no, that I thought workman's comp is based off of wages paid and I can turn over just the copies of W-2's of my employees for the time the policy I had with them was in effect and mail them in but I did not see why it had to be face to face.
> 
> ...


Let me tell you how this is going to go because I have been through this. They have NO intention of giving you a refund. They are going to tell you that you were undercharged while you were covered by them and they're going to want THOUSANDS extra for what they're going to call "unpaid" premiums.

They're going to say that the amount you were paying was just an estimate and they need to do this audit for an accurate accounting. If you read your policy carefully you'll see that you agreed to this.

It's an absolute scam if you ask me but I signed on the dotted line not knowing what all of that language really meant. My old company claims I owed an additional $5000 and after a lot of correspondence back and forth they have given up trying to collect.

My new work comp company has told me that they will do audits from time to time but that they'll never come back and say that I owe money from previous years as long as I continue to give them accurate information up front.


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## KAG (Jul 19, 2007)

Camden;703266 said:


> Let me tell you how this is going to go because I have been through this. They have NO intention of giving you a refund. They are going to tell you that you were undercharged while you were covered by them and they're going to want THOUSANDS extra for what they're going to call "unpaid" premiums.
> 
> They're going to say that the amount you were paying was just an estimate and they need to do this audit for an accurate accounting. If you read your policy carefully you'll see that you agreed to this.
> 
> ...


I figured it was to try to get $$ out of me.

So in your opinion its ok to tell them to "go pee up a rope"?


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## JDiepstra (Sep 15, 2008)

I have never heard "go pee up a rope" but if it is similair to "go pound sand" then yes tell them that.


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## Turbodiesel (Aug 5, 2008)

KAG;703229 said:


> Got a phone call from my old Workman's Comp insurance company telling me I was randomly selected to be audited. They want to set up a face to face audit time and want me to turn over all my business financial records for 2008. The policy in question expired a month ago and I now use a different company.
> 
> I told them no, that I thought workman's comp is based off of wages paid and I can turn over just the copies of W-2's of my employees for the time the policy I had with them was in effect and mail them in but I did not see why it had to be face to face.
> 
> ...


Thats not random , believe me. Someone you were doing business with whether it be an employee or client , got into a situation . Think hard.

It may be in your best interest to notify your attorney / accountant about this.


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## Eronningen (Dec 20, 2008)

Don't get carried away guys. I get audited every single year and I just figure on it. Most larger Comp and GL companies do this especially with larger companies/payrolls. 
Do you pay based on an estimated yearly payroll or do you pay on reporting forms monthly based on what your payroll was? Either way they need to verify that your estimate and payments were correct, since work comp is based on payroll totals. Its not just a lump sum ins. Also, many companies, myself included have many different class codes, ie; street cleaning/snow removal, clerical, sales, roofing, carpentry, etc. each carrying their own seperate rate. They also need to see that broken down at audit time. 
I assume the reason they are auditing you if they have not before is because you did change carriers and that is perfectly normal. 
As far as the assumptions that they will screw you and you will owe thousands.....come on guys, it goes both ways. Some years I am refunded and some years I owe tens of thousands, depends on my estimates. If I owe that means I had a good year and under estimated/under paid. The refunds I have gotten have been from the opposite. 
I suggest you comply.


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## festerw (Sep 25, 2003)

We had one every year, got 8K back year before last. IIRC all they wanted was payroll and who did what, for example an office worker is less to insure than a laborer, I'm sure this differs per company though.


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## Eronningen (Dec 20, 2008)

Turbodiesel;703350 said:


> Thats not random , believe me. Someone you were doing business with whether it be an employee or client , got into a situation . Think hard.
> 
> It may be in your best interest to notify your attorney / accountant about this.


What do you mean by this?


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## Turbodiesel (Aug 5, 2008)

You get audited every year ? Never heard of that happening....large or small company .


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## Eronningen (Dec 20, 2008)

Turbodiesel;703364 said:


> You get audited every year ? Never heard of that happening....large or small company .


I don't know what you would consider large or small. I consider us medium. Gross revenue over 1 million. 
But this has been the norm over the last 5-6 years where sales were below 500k.


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## ERCKWD (Jan 4, 2009)

We too get audited every year. When they call I break down the employees hours/positions, separate the overtime and reg. time chart them out and give the WC auditer a copy. Usually have no problems.


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## KAG (Jul 19, 2007)

Well no matter what all they will get is W-2 info if push comes to shove and not complete financial books. That in my mind is too much info for their needs. No face to face time either.


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## Eronningen (Dec 20, 2008)

KAG;703389 said:


> Well no matter what all they will get is W-2 info if push comes to shove and not complete financial books. That in my mind is too much info for their needs. No face to face time either.


Do you have more than one class code? If so you should consider breaking it down into codes because if you do not they will put all the payroll into the higgest rate code and then you will be losing money for nothing. If not than maybe W-2's will work. 
There is nothing to worry about being face to face, they don't interogate. They are just looking for someone to hand them what they need. Most of the time I just prepare the info or have my accountant prepare it and either they or I meet with the auditor. Not a big deal.


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## Eronningen (Dec 20, 2008)

ERCKWD;703378 said:


> We too get audited every year. When they call I break down the employees hours/positions, separate the overtime and reg. time chart them out and give the WC auditer a copy. Usually have no problems.


Thats exactly what we do.


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## Turfmower (Dec 20, 2003)

We get audited every year the amount you pay is based off you actual payroll. you need to beak down regular time and over time. you all so need certificates of insurance of any subs you had work for you. It is not a big deal unless you gave them a low payroll figure when they wrote the policy.


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## be250 (Nov 6, 2006)

yes they will charge you for subs , big time , & if you don't pay they sue


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## KAG (Jul 19, 2007)

be250;704030 said:


> yes they will charge you for subs , big time , & if you don't pay they sue


I don't know why they would do that. All the subs and day labor companies I used have their own insurance and such or we don't use them. If that was the case then the companies that hire us would have to pay our WC. That just doesn't sound right and I hope its not because I do sub out anything that I actually don't do. If a customer asks if we do it I have learned to almost always say yes then sub it or take a sales lead fee on it.


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## wls (Aug 17, 2003)

WMHLC;703243 said:


> It's no big deal. My insurance company does it every year. They just check to make sure you have enough coverage. If you have to much they will mail you back a check for over payment.


Mine does also, usually just fill in the spaces, or I have talked to the auditer, over the phone. I too get audited every year.


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## Mark Oomkes (Dec 10, 2000)

KAG;703229 said:


> Got a phone call from my old Workman's Comp insurance company telling me I was randomly selected to be audited. They want to set up a face to face audit time and want me to turn over all my business financial records for 2008. The policy in question expired a month ago and I now use a different company.
> 
> I told them no, that I thought workman's comp is based off of wages paid and I can turn over just the copies of W-2's of my employees for the time the policy I had with them was in effect and mail them in but I did not see why it had to be face to face.
> 
> ...


Something isn't right with this scenario. They have no need to know your sales for a WC audit, as has been stated, they only need payroll.

If they were your liability carrier as well, then they will want to know the sales, as liability is usually based off sales volume.



Camden;703266 said:


> Let me tell you how this is going to go because I have been through this. They have NO intention of giving you a refund. They are going to tell you that you were undercharged while you were covered by them and they're going to want THOUSANDS extra for what they're going to call "unpaid" premiums.
> 
> They're going to say that the amount you were paying was just an estimate and they need to do this audit for an accurate accounting. If you read your policy carefully you'll see that you agreed to this.
> 
> ...


I frequently get refunds, maybe your agent is underestimating your payroll?



Eronningen;703353 said:


> Don't get carried away guys. I get audited every single year and I just figure on it. Most larger Comp and GL companies do this especially with larger companies/payrolls.
> Do you pay based on an estimated yearly payroll or do you pay on reporting forms monthly based on what your payroll was? Either way they need to verify that your estimate and payments were correct, since work comp is based on payroll totals. Its not just a lump sum ins. Also, many companies, myself included have many different class codes, ie; street cleaning/snow removal, clerical, sales, roofing, carpentry, etc. each carrying their own seperate rate. They also need to see that broken down at audit time.
> I assume the reason they are auditing you if they have not before is because you did change carriers and that is perfectly normal.
> As far as the assumptions that they will screw you and you will owe thousands.....come on guys, it goes both ways. Some years I am refunded and some years I owe tens of thousands, depends on my estimates. If I owe that means I had a good year and under estimated/under paid. The refunds I have gotten have been from the opposite.
> I suggest you comply.


Exactly, other than complying with all financial info handed over to them.



Turbodiesel;703364 said:


> You get audited every year ? Never heard of that happening....large or small company .


Apparently you don't get around much. I get audited every year for WC and liability. Have been for as long as I've owned the company and at least 25 years before that. And I would consider myself to be small to medium.

Do you have employees? Do you own a business? Maybe that's why you've never heard of it.



KAG;703389 said:


> Well no matter what all they will get is W-2 info if push comes to shove and not complete financial books. That in my mind is too much info for their needs. No face to face time either.


Don't worry about the face to face time, this isn't an IRS or Dept of Treasury audit. Normally they don't even send out an employee, they hire an auditing firm to do it. Takes about an hour.

I would definitely keep your financials to yourself.



be250;704030 said:


> yes they will charge you for subs , big time


Wrong, all you have to do is prove that the subs had their own WC policy for that time frame that is being audited. This can be done after the audit if you don't have the policies on hand.

They will also want to know if you had any casual labor--$600 and under--because you don't have to go through all the BS of making someone that makes less and employee.

Remember, they agreed to cover your employees and anyone who doesn't have their own WC policy that is performing work for you. And you agreed to their policies and paid them an estimated amount for this. It is only fair that if you exceeded your estimated exposure to them that you pay and that if you overpaid they refund you.

You can only be charged for your exposure. No more, no less.


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## frozenokiewi (Dec 26, 2008)

*Yeah do the audit!*

I just got audited by workmans comp and they owed me $265.00 they base if off average wages and hours and they "over estimate" when you sign up. I called my current company and requested an audit of 2007 & 2006 since there is a five year statute here in Wisconsin. They owe me more money. I would suggest you call and ask then what number they based the premium on, mine for example was set for 93,000 in payroll and after we looked we only had 82,000 in payroll so I was overbilled based on their estimates.

You no longer have a policy, I would have no idea how they could bill you if there was a shortage. I do know they will owe you money if they chraged you for a higher payroll rate than you actually paid out in that year.

I would also suggest you call your current inurance company and ask them if the old company is within the law to bill you for a shortage. I don't think they are...also consider if you had any claims. If you did have a claim would you be in a lurch for not paying the correct premium? Just consider all aspects of this...we all know how insurance companies can be. Call your current agent and ask. By allowing an audit I have already recovered $250.00 and might recover almost $650.00 when this is said and done. All I had to do was send in a copy of my 941 form and they sent me a check.



KAG;703229 said:


> Got a phone call from my old Workman's Comp insurance company telling me I was randomly selected to be audited. They want to set up a face to face audit time and want me to turn over all my business financial records for 2008. The policy in question expired a month ago and I now use a different company.
> 
> I told them no, that I thought workman's comp is based off of wages paid and I can turn over just the copies of W-2's of my employees for the time the policy I had with them was in effect and mail them in but I did not see why it had to be face to face.
> 
> ...


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## bluerage94 (Dec 24, 2004)

Same here, they give you a general price based on wages, then audit to get the exact figures......


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## purpleranger519 (Jan 1, 2006)

Turbodiesel;703364 said:


> You get audited every year ? Never heard of that happening....large or small company .


I get it every year as well. Now you've heard it twice.

It's funny seeing all these replies from people that don't have a clue. This is no big deal at all.


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## snowplowchick (Feb 22, 2008)

Why WOULD you go to the effort if you don't even have a policy with them any longer? Unless you have paid out enormous wages in the last year AND didn't keep good track, you are only setting yourself up to possibly pay MORE money. If you are sure you won't be getting a sum of money back that would justify the risk of submitting information to a former ins. co, then I certainly wouldn't do it.

That being said, you obviously are on their radar, and possibly you will be audited in future from your new firm. You obviously wouldn't refuse your current ins. company if they asked.

Why invite trouble? 
I would not ask your current insurance company for advice, that would just red flag you like you have something to hide.


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## Mark Oomkes (Dec 10, 2000)

snowplowchick;704349 said:


> Why WOULD you go to the effort if you don't even have a policy with them any longer? Unless you have paid out enormous wages in the last year AND didn't keep good track, you are only setting yourself up to possibly pay MORE money. If you are sure you won't be getting a sum of money back that would justify the risk of submitting information to a former ins. co, then I certainly wouldn't do it.
> 
> That being said, you obviously are on their radar, and possibly you will be audited in future from your new firm. You obviously wouldn't refuse your current ins. company if they asked.
> 
> ...


OK, let's try this again.

Insurance company agrees to cover the exposure for WC by said company.

Said company agrees to pay for that level of exposure of WC.

Since no one in the contracting industry can pinpoint EXACTLY what their WC exposure will be, the insurance company (with the help of your agent) estimates what that exposure will be.

At end of coverage period, insurance company audits your payroll to determine their exact exposure, compared to estimated exposure.

If said company's payroll was higher than estimated, subs that did not have their own insurance, company had more OT than estimated, etc, etc, etc; said company owes more.

If said company estimated high, they will get a refund from insurance company.

This isn't rocket science, despite what turbodiesel\santo says. But then santo isn't a rocket scientist, or even close to one.

The only red flag here is why they are requesting full financials.

Not sure if I can type any slower than that, so I hope ya'll can understand that.


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## KAG (Jul 19, 2007)

For me the area of concern was:

1. They requested full financial disclosure 
They are getting wages paid out to employees only.

2. The policy has already expired
No idea if they can do that once its expired but I am sure they can

3. They want face time
They will get it mailed or faxed

I looked at things and it looks like my wages paid out were $8k more than the premium so I guess I will owe the difference in premium cost. I never for a second thought it was about a refund like they keep saying. All the information I received was good in one way or another. Thank you.


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## Mark Oomkes (Dec 10, 2000)

KAG;704367 said:


> 2. The policy has already expired
> No idea if they can do that once its expired but I am sure they can


Why couldn't they? They covered you for that time, offered to cover your exposure for that time frame. Just because you went with a different company doesn't mean they don't owe you a refund or you owe them more.

They can't really audit you every month and make it worthwhile. This is purely standard practice for insurance companies.


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## T-MAN (Jan 9, 2001)

Did you have GL and Comp with the same carrier ?

If the answer is yes, then the reason for the full audit is your GL will be based on payroll. Payroll goes up, GL goes up. Pretty simple IMO. Like Mark stated, its all about exposure for the carrier.
If everyone was allowed to estimate what they think they should owe, yet have coverage for everything, ya think they would make any money ?
Its a fair system, if ya cheated ya owe. Simple as that.
If you paid what you should have, no worries.
If you use subs that dont have insurance you owe on them too. 
If you decide to blow off the audit, expect to get served, they have the right to sue, and you will be held responsible for ALL there legal fee's too. Read the fine print :waving:
They were not born yesterday.
Why should an insurance company cover you for "Everything" when you only want to pay for GL/ comp for office help ?

Oh and yes I get audited EVERY YEAR FOR comp and GL, I am a tiny company that has 2 year round full time employee's, plus me. No comp on me. My accountant handles the audit.They bill me for an hour.
My GL and Comp is around 15K not including trucks.


Sucks to be legit....


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## mullis56 (Jul 12, 2005)

Yes standard practice. Unreal how many aren't and it is noticable due to their posts.


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## NorthernSvc's (Mar 12, 2006)

i get audited every year, usually just have to fax them everything, and a quick phone call handles it, every now and then ( 1 time in past 6 years) they want to meet and look at everything.


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## snowplowchick (Feb 22, 2008)

In Canada it works much differently, if that is what you mean. I have a WSIB account which is Workmans Comp in US and it is a gov't agency. There are audits, but not annually by any means. Totally different system.


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## snowplowchick (Feb 22, 2008)

In Canada it is much different. Here you have an account with WSIB which is a gov't agency. No annual audits to my knowledge. I have a WSIB account and never been audited, nor have I heard of anyone being audited by WSIB.

And mark, no need to type slower so I understand. Thanks.



Mark Oomkes;704364 said:


> OK, let's try this again.
> 
> Insurance company agrees to cover the exposure for WC by said company.
> 
> ...


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## sp6x6 (Jan 14, 2009)

snowplowchick;704349 said:


> Why WOULD you go to the effort if you don't even have a policy with them any longer? Unless you have paid out enormous wages in the last year AND didn't keep good track, you are only setting yourself up to possibly pay MORE money. If you are sure you won't be getting a sum of money back that would justify the risk of submitting information to a former ins. co, then I certainly wouldn't do it.
> 
> That being said, you obviously are on their radar, and possibly you will be audited in future from your new firm. You obviously wouldn't refuse your current ins. company if they asked.
> 
> ...


I get audted everyyear for comp and liabilty, because it is the law in the agreement you signed, bassed on a estimate, BUT BIILED ON ACTUAL payroll. THE reason you comply also is because if you dont you eventually wont get comp or liabilty coverage and wont be able to work as a bussiness or sub


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## sp6x6 (Jan 14, 2009)

be250;704030 said:


> yes they will charge you for subs , big time , & if you don't pay they sue


 you dont get charged for subs as long as you provide that they are not employes, but you do ge charged for them for your general liability because you pay them and are at more risk. Eronningen is exactly right. Welcome to bussiness 101


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## T-MAN (Jan 9, 2001)

sp6x6;721097 said:


> you dont get charged for subs as long as you provide that they are not employes, but you do ge charged for them for your general liability because you pay them and are at more risk. Eronningen is exactly right. Welcome to bussiness 101


You are partially correct about the subs. If they provide proof of there workers compensation coverage for there employee's you do not owe on them. If they do NOT provide a certificate for comp you will have to pay. A GL certificate is fine for a sole proprietor, but once the checks going out get bigger, your carrier is going to want to see comp paid by the sub. 
The auditors are pretty sharp, its not there first rodeo for sure. 
If your up front, it usually goes good.

99% of contractors we do carpentry work for, will not release a check till you provide certificates of insurance.
100% of title companys will not release a check without comp, and gl certificates on file.
100% of my Snow Contracts require insurance certificates and my T.I.N. on file too.
Its part of doing business.
If your paying subs, you should have the same policy for certificates provided, before checks go out. My agent faxes out certificates all the time, its about all they do to earn there commision LOL.


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## Superior L & L (Oct 6, 2006)

WOW, it crazy how little some people know about there own business. We like some people (LOL) on here get audited every year. The guy comes to us, takes all our payroll and goes in the confrence room for a hour or two, comes out every once in a while for more info then leaves. They are nice and friendly and just doing there job.

Usually a month or so later we get a bill for what extra we need to pay. We never get a refund it seams, witch is fine. Better pay later than lend the insurance company money interest free


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## shovelracer (Sep 3, 2004)

KAG;704367 said:


> For me the area of concern was:
> 
> 1. They requested full financial disclosure
> They are getting wages paid out to employees only.
> ...


As mentioned its not a big deal. And yes if you overpaid they will give a refund. This year I will get back workers comp on about 40K due to some cutbacks. Anyways WC laws will vary by state so this may be different for you. In NJ you can elect to cover yourself or not. If you do than your business profit IE your pay is part of what they base your rate on. So if in your state you can and do cover yourself than this is why they need your financials for WC. Either way you are going to have to pay up if you underpaid. Its not a scam its just the way it is. I think the others explained it fine.


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## sp6x6 (Jan 14, 2009)

Ihad a bad year in construction, so I am looking forward to a general liability Refund.


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