New Business Direction LLCVideo Tutorial: How to Set Up Workers’ Compensation Tracking in QuickBooks Desktop
Preparing for a workers’ compensation audit can feel overwhelming, especially when you are trying to pull together a year’s worth of payroll information at the last minute.
Fortunately, QuickBooks Desktop Payroll Enhanced or Assisted users can track the information they need throughout the year and generate a helpful report when your insurance auditor comes calling. With a little setup now, you can save yourself time later and feel more confident that the numbers you provide are accurate. Watch our video tutorial and read through the instructions below to learn how.
1. Turn On Workers’ Compensation Tracking
In QuickBooks Desktop Enterprise Solutions, go to Edit > Preferences > Benefits & HR > Company Preferences.
Select the option to track workers’ compensation insurance, then save your changes. This will activate the workers’ compensation features in your company file.
2. Enter Your Workers’ Compensation Codes
Next, go to Lists > Workers Comp List.
You can find the information you need on the declarations page of your workers’ compensation insurance policy.
Enter each:
- Classification code
- Description
- Rate per $100 of wages
- Policy effective date
Different types of work may have different codes and rates, so make sure each classification matches your insurance policy.
3. Add Your Experience Modification Factor
Your policy may also include an experience modification factor. This factor adjusts your premium based on your company’s claims and safety history. For example, a factor of 100% is considered standard. A lower percentage generally means a better safety record and a lower premium, while a higher percentage may increase your premium.
Enter the percentage and the policy effective date exactly as shown on your insurance documents.
4. Review the Payroll Item
Open your Payroll Item List and locate the workers’ compensation item. It should be set up as a company contribution and connected to the appropriate workers’ compensation payable and expense accounts.
Proper account mapping helps ensure the amounts appear correctly in your financial reports.
5. Assign Codes to Employees
Once your workers’ compensation codes are set up, the next step is to assign the appropriate code to each employee. Open the Employee Center, select an employee, and choose the classification that best reflects the work they perform. For example, a shop foreman will likely have a different code than someone working in an administrative role.
If an employee performs more than one type of work, you may need to use different workers’ compensation codes on individual earnings lines when running payroll. Taking the time to assign these codes carefully helps keep your reports accurate and can make the annual audit much easier.
6. Confirm Codes During Payroll
When you run payroll, review the workers’ compensation code assigned to each item in the Earnings section. QuickBooks will use the employee’s wages, classification rate, and experience modification factor to calculate the estimated premium.
By reviewing the code during each payroll run, you can help prevent classification errors later.
7. Run Your Workers’ Compensation Report
When it is time for your annual audit, go to Reports > Employees & Payroll > Workers Comp Summary. Set the report dates to match your insurance policy period.
The report will show information such as:
- Covered wages
- Workers’ compensation rates
- Estimated premiums
- Experience modification adjustments
Closing Thoughts
Your auditor may also ask for supporting documents, such as quarterly payroll tax returns and state unemployment reports, so it helps to gather those in advance. Taking time to review your workers’ compensation report before the audit gives you a clearer idea of whether you may owe an additional premium or receive a refund—and it is always better to understand the numbers before the auditor presents them to you.
If you need help setting up workers’ compensation tracking or cleaning up your QuickBooks payroll records, reach out to New Business Directions to schedule a strategy session. It’s OK. We can help. Contact us here.
