Every payroll you run is paperwork for your workers' comp audit.
Your workers' comp premium starts as an estimate. When the policy term ends, the carrier sends an auditor to check what you actually paid employees and subs. They don't take your word for it. They ask for four things, and each one comes from a job you do during the year.
Quarterly 941sFederal payroll tax returns
Payroll summary by employeeWages per person, per job class
Subcontractor payments & 1099sWho you paid, how much, and for what trade
Subs' insurance certificatesProof each sub carried their own coverage
Your employees
W-2 crewSet up in payroll
W-4, I-9, and the right job class. Carpenters, roofers, and office staff each carry a different comp rate.
Run payroll
Taxes are withheld, and wages are recorded by employee and job class. This builds your payroll summary.
File the 941
It reports total wages and taxes to the IRS. Nevada's quarterly unemployment report is due on the same schedule.
Send W-2s & file the 940
Year-end totals should match the four 941s. If they don't, the auditor will notice.
Your subcontractors
1099 tradesCollect W-9 + insurance
Get a certificate of insurance showing both general liability and workers' comp coverage, or a valid exemption. Check the policy dates.
Track by sub & trade
Code each payment to the sub and the work performed (framing, electrical, drywall). "Cash to Mike" doesn't survive an audit.
Request updated certificates
If a certificate lapses mid-job, those months are uncovered.
File the 1099-NECs
File one for every sub paid $2,000 or more in 2026 ($600 for 2025 payments). The totals come straight from your payment tracking.
Your comp policy
Insurance carrierPremium is set on an estimate
You tell the carrier your expected payroll by job class. They price the policy from that number.
Your real numbers build up
Crews grow, jobs change, subs come and go. The estimate stops matching reality.
Carrier schedules the audit
The carrier requests records A through D. The audit may be done by mail, or an auditor may visit in person.
The workers' comp audit
The auditor lines up your 941s against your payroll summary, then goes through every sub you paid. Anyone without proof of their own coverage gets a closer look.
- A941s confirm total wages
- BPayroll summary splits wages by job class
- C1099s & payment records list every sub
- DCertificates show which subs were covered
Your premium is adjusted to your actual payroll
If you overestimated, you may get money back. Either way, the audit closes quickly.
An unexpected bill
The carrier can treat an uninsured sub's pay as your own payroll and charge you premium on it. That bill often arrives months after the job is paid and closed.
We keep these four records clean all year, so audit season is a matter of sending files, not digging through a truck full of receipts.
General information for contractors, not tax or legal advice. Audit procedures and rates vary by carrier, state, and policy.
Ready to Get Started
Let's Talk.
No pressure, no pitch. Just a straight conversation about your books and whether we're the right fit.