(Q) Learning that I’ve been selected for a WCB audit has triggered a fight-flight response. And now I need to submit documents in order to verify my operations and financial records. Did I bring this on myself by somehow accidentally misreporting?
(A) Unlike the CRA, WCB isn’t known to use algorithms or AI-technology to detect inconsistencies in reporting. Instead, WCB random samples so to speak, meaning that your selection was probably determined by chance and not by design.
As a refresher, employers are required to report workers’ assessable earnings by the end of February each year. This includes the earnings of all workers, regardless of their occupations in your business.
Assessable earnings are the gross earnings of each worker up to the annual maximum assessable amount specified by the Board. WCB premiums are based on these assessable earnings, and they may include the following:
• Gross employment income you report on T4s
• Earnings of subcontractors you hire who lack a current WCB account
• Earnings of casual labourers
• A fair market value for unpaid labour
• Earnings not reported in box 14 of the T4, such as tips, bonuses or certain other taxable benefits
The most frequent reporting errors typically relate to contractors’/subcontractors’ earnings. This is because, should your contractors be unable to provide a clearance letter, the labour portion of their contract is to be included in your assessables i.e., hire a janitor to clean your office, and that person does not have a WCB account. The janitor is thus considered your worker.
The inclusion of ‘personal or living allowances (aka LOA)’ as part of the assessable earnings calculation also takes many companies by surprise. This means that a field worker who receives $100/day for LOA is actually earning, by WCB’s standards, an additional $100/day in earnings (aka insurable earnings).
It’s also important to check your assessable earnings estimate throughout the year. If your estimate isn’t accurate, you must revise it before December 31 of the current year to avoid penalties. Fortunately WCB provides a 50% margin of error, and penalties are assessed on actual earnings that exceed this margin.
This means that should your actual assessable earnings exceed 150% of your estimate (as of December 31), a 10% penalty plus interest is levied on the premium portion that exceeds 150% of the estimate. But so long as you update estimated earnings before year-end, you can avoid the penalties.