Premium Audit Customer FAQ

🔍 GENERAL AUDIT QUESTIONS

1. What is a Premium Audit and why is it required?
A Premium Audit is a routine, state-required review of your payroll, classifications, and operations during your policy period. It ensures your premium reflects your actual exposure. This process is mandatory and ensures accurate billing and regulatory compliance.

2. Is the Workers’ Compensation audit optional? 
No. A premium audit is a required condition of your workers' compensation policy and mandated by regulatory authorities, including the National Council on Compensation Insurance (NCCI). If you do not complete the audit, NEXT may charge an Audit Noncompliance Charge (ANC) and report you as non-compliant to state or national rating bureaus. This designation can impact your ability to obtain future workers’ compensation coverage and may affect your experience modification factor (Mod).

3. What happens if I don’t complete the audit?
If audit records are not submitted after three notices, the audit will close as non-responsive. A noncompliance surcharge will be applied, and your policy may be reported to the state rating bureau. You can still reopen your audit by contacting: 📧 wc_auditors@next-insurance.com

4. Why am I being audited if I have a Pay-As-You-Go (PayGo) policy? 
Even if you're on a PayGo (Pay-As-You-Go) policy, a premium audit is still required. PayGo helps align your premium payments with your actual payroll during the policy term, but it does not eliminate the need for a final audit. The audit verifies all wages paid, ensures employee job duties are classified correctly, and captures any subcontractor or 1099 labor that may not be included in payroll feeds. Platforms like QuickBooks or Gusto typically send summarized data to NEXT and may not include critical audit documents like federal tax returns (941s), job duty logs, or Certificates of Insurance (COIs) for subcontractors. Additionally, state regulators such as NCCI and WCIRB require all workers' compensation policies—regardless of billing method—to undergo a final audit to ensure compliance and accurate premium calculation.

Our policies contain the following:

5. Who performs the audit? 
Most audits are conducted by NEXT’s internal team premium auditors. However, in certain states or for policies exceeding specific premium thresholds, we work with trusted third-party vendors to ensure timely and compliant audit completion.

When a vendor is assigned, they will reach out directly to you. Our approved vendor partners include:

• Lowry & Associates: Call 801-501-8808
• Afirm Solutions: Call 800-223-2310 

If you’re unsure who is handling your audit, please contact our support team and we’ll connect you to the correct auditor.

📋 PREPARING FOR YOUR AUDIT

6. What documents do I need to provide? 
These documents are outlined in all pre-audit notifications and reminder emails:

• Payroll Summary (employee names, roles, wages, overtime)
• Federal 941 / State Tax Returns
• Subcontractor Labor Reports (names, duties, payments)
• Certificates of Insurance (COIs) for subcontractors
• Profit & Loss Statement or Schedule C 

7. How should I prepare for the audit?
Start gathering documents as early as 30 days before policy expiration. Clear audit preparation tips are included in our notification letters. You’ll be guided every step of the way through emails and audit portal instructions.

8. Why are subcontractors included in the audit? 
Subcontractors are included in the audit to ensure all labor exposure during the policy period is accurately reported and classified. Per NCCI guidelines, if subcontractors do not provide valid and verifiable Certificates of Insurance (COIs) for workers' compensation coverage, they may be treated as your employees and included in the audit premium calculation. Auditors also need to know what type of work the subcontractor performed, how much they were paid, and whether the work falls within your insured operations. This process helps prevent underreporting and ensures compliance with both your policy terms and state regulations.

9. Why do you need officer/member verification documents? 
Officer, partner, or LLC member information is required to determine if their payroll should be included or excluded, and whether state-specific payroll minimums or maximums apply. Documents like Schedule C, K-1s, or 1125-E help confirm their ownership and compensation.

10. Why are 941s needed if the audit isn’t based on the calendar year? 
941s provide government-verified payroll data, which allows auditors to cross-check payroll records for accuracy, even if the audit period does not align with the calendar year.

11. What if I don’t have employees, subcontractors, or tax filings yet? 
If you operated your business without employees or subcontractors during the policy period, we ideally request a Profit and Loss Statement to validate this. If that document is not available, you may instead complete a Certification of No Employee/Subcontractor Use form. This form helps confirm that there was no reportable payroll or labor exposure during the covered term.

12. Can NEXT sign an NDA before reviewing my records? 
No. As outlined in your insurance agreement, audit records must be submitted without requiring a separate NDA. Your data is securely used for audit and regulatory purposes only.

13. What happens if I used volunteers, interns, or family members in the business? 
If anyone performed labor for your business—even unpaid—they may still be considered reportable under audit rules. Inform your auditor of any such labor so it can be assessed properly.

14. What are the most common reasons for audit premium increases? 
Premium increases typically result from:

• Unreported payroll
• Misclassified job duties
• Payments to uninsured subcontractors
• Missing COIs
• Ineligible use of low-risk classification codes

15. What should I do if I have seasonal or temporary workers? 
Report all temporary or seasonal workers. Include dates worked, duties, and wages so that their exposure is properly included in the audit.

16. Can I split an employee’s payroll across multiple class codes? 
Yes, but only if accurate time records are kept that show the hours worked in each role. Without records, the highest-rated class code will apply to all wages.

17. Do I need to report tips, bonuses, or other compensation? 
Yes. Wages, tips, bonuses, vacation pay, and other earnings are considered payroll for audit purposes unless specifically excluded.

18. Can my CPA or bookkeeper complete the audit for me? 
Yes. You may authorize an accountant or bookkeeper to complete the audit as long as they have access to all required documentation.

19. What if my business was closed or inactive during the policy period? 
Inform your auditor. You may be asked for supporting documentation like a license cancellation or a written statement confirming no operations occurred.

20. What happens if I changed business operations mid-policy? 
If your operations changed, notify your auditor. They will assess whether a different or additional class code should apply.

21. How do I complete my audit online using NEXUS? 
To complete your audit online, go to audits.next-insurance.com, as indicated on your audit notification letter. Once there, enter the Control ID and Password provided in the letter to log in.

After logging in, you’ll be guided to:

• Enter your business information
• Report payroll data for the audit period
• Provide owner/officer details, including compensation and job roles
• Upload required documentation, which may include:
  • Payroll Summary
  • 941 Federal Tax Returns
  • Subcontractor Payment Records
  • Certificates of Insurance (COIs)
  • Profit & Loss Statement or Schedule C (if applicable)

Once your information is submitted, your assigned auditor may follow up with questions or request additional clarification. If you have any trouble accessing the portal or uploading documents, our support team is here to help.

22. What if I did not have any employees? 
We understand your business may not have had employees, or been actively operating during the policy period. However, we’re still required to collect documentation that helps confirm whether any business activity occurred during the audit timeframe. To move forward, please provide at least one of the following:

• Schedule C from your most recent tax return (for sole proprietors)
• Income Statement showing business revenue and expenses for the policy period
• Profit & Loss Statement for the policy period

These records help us verify the business status and ensure all relevant information—such as potential subcontractor or 1099 labor—is accurately reflected. If you don’t have these records available or are unsure what to submit, please reply to this message or contact your assigned auditor. 

23. Why am I being asked to do an audit if I’m now with another insurance company? 
We understand your coverage with NEXT Insurance is no longer active and you’ve transitioned to another provider. That said, the policy was in effect during a specific period, and as part of the standard terms and conditions—we’re still obligated to complete a final audit for that timeframe.

24. Can I meet with someone in person to conduct my audit (Requests for Physical Audit)? 
We’re happy to support your request for an in-person audit. Your audit will be assigned to one of our trusted external partners who handle these appointments on our behalf. Once assigned, the audit vendor will reach out to you directly to coordinate a convenient date and time. If you have any questions in the meantime, we’re always here to help!

25. I missed the audit due date – Can I still complete it? 
If you've missed your audit deadline, please contact your assigned auditor or email wc_auditors@next-insurance.com. Depending on the status of your audit, we can assist with either an extension or beginning the reopen process—as long as the policy is still within the 3-year audit revision window.

To request a reopen on a closed audit, please include the following documentation (as applicable):

• Payroll Summary – Include all employees (including former), their job duties, gross wages, and overtime
• Federal 941s or State Quarterly Tax Returns
• Subcontractor Details – Names, total paid, and job duties
• Certificates of Insurance (COIs) for any subcontractors used
• Profit & Loss Statement or Schedule C (for sole proprietors)

We’re happy to assist if you have any questions. Thank you for your attention to this matter.

AFTER THE AUDIT 

26. How will my premium change as a result of the audit? 
Your premium may increase or decrease based on the actual business activity during the policy period. The audit reviews payroll, operations, employee classifications, use of subcontractors, and officer inclusion. Accurate reporting helps ensure you’re not overpaying or underpaying for your coverage.

27. Why is my audited premium different from my original premium? 
Your premium was estimated when your policy began. After it ends, we review actual business details to see if your original estimate was accurate. Your Premium Audit Statement will show the changes and how your final premium was calculated.

28. What is a Premium Audit Statement? 
This is a detailed document showing how your premium was adjusted. If your actual payroll was lower, you may receive a refund. If it was higher, a balance may be owed. You can choose to pay in full or select a payment plan.

29. When can I expect my audit refund? 

• Card refunds: Typically processed in 3–12 business days
• Check refunds: Mailed via USPS and typically delivered in 5–15 business days

30. How can I pay what I owe from the audit? 
You may pay:

• By credit card (on file or new)
• With a physical check (include policy number)
• By one-time ACH transfer (instructions provided)

31. Can I set up a payment plan for my audit balance? 
Absolutely!  We offer flexible payment plans. Payments are scheduled for the 1st or 15th of each month and processed by credit card.

32. What if I disagree with the audit results? 
If you believe there’s an error in your premium audit, you have the right to dispute the results. To begin, email wc_auditors@next-insurance.com with the subject line “Audit Dispute – (Policy Number).” In your message, include:

• A clear statement explaining the reason for the dispute (e.g., incorrect classification, payroll discrepancy, subcontractor status)
• Supporting documentation (e.g., payroll reports, 941s, COIs, profit & loss statements, project contracts)

Once your submission is received, our audit team will carefully review your records. We may contact you if additional information is needed. If the dispute is validated, your audit will be updated, and the billing adjusted. If not, we will provide a written explanation with next steps.

33. You used the wrong class codes. How can I fix this? 
Follow our class code correction request process by emailing wc_auditors@next-insurance.com with documentation and a detailed explanation of the correction.

34. Why are you billing me for audits from older years? 
Premium audits may be conducted for policies that ended in prior years to ensure compliance with workers’ compensation rules and your policy’s terms. We are required to retain and review records and report audited payroll data for up to 3 years after the policy period ends (or up to 120 days in states like ME, MO, and NH). This supports accurate rate-making by regulatory bureaus and helps ensure that every policyholder is treated fairly. Your policy also includes terms that require maintaining records and making them available for post-policy audits.

35. What is audit noncompliance?
Audit noncompliance occurs when we do not receive the required audit documentation despite multiple outreach attempts. If your policy is renewed and the audit remains incomplete, an Audit Noncompliance Charge (ANC) may be applied in accordance with your policy's Audit Noncompliance Endorsement (WC 00 04 24). The ANC is a surcharge intended to ensure compliance with audit requirements and may impact your ability to maintain or secure workers' compensation coverage in the future. 

36. Why is my audit non-compliant? 
Your audit was closed as non-compliant because we did not receive the required documentation after multiple outreach attempts. This means the audit could not be completed due to lack of cooperation. You can still resolve this by emailing wc_auditors@next-insurance.com with the following documents:

• Payroll Summary: List of employees, job duties, gross wages, and any overtime
• Federal 941s / State Quarterly Tax Returns for the policy period
• Profit & Loss Statement or prior-year Schedule C
• Subcontractor Labor Details: Names, job duties, and amounts paid
• Certificates of Insurance (COIs) for any subcontractors (if applicable)

Once we receive and review your documents, we’ll complete the audit. The audit non-compliant charge will be reversed upon audit review.

37. Can the Audit Noncompliance Charges be reversed? 
Yes. Once the required audit documentation is received and reviewed, we will complete the audit and reverse the audit noncompliance charge. Timely submission is important to ensure accurate premium calculation and avoid surcharges charges. If you need help submitting your documents, contact us at wc_auditors@next-insurance.com.

SUBCONTRACTORS

1. Why are you asking about subcontractors I hired? 
Workers' Compensation audits are designed to verify that all labor exposures are accounted for. If you hired subcontractors during your policy period, we need to determine if they were covered by their own insurance or should be included in your audit as part of your total payroll exposure. This is to ensure the policy accurately reflects the risk of workplace injury associated with all labor used during the policy period.

2. Can I exclude subcontractors from the audit if they were independent contractors? 
To exclude a subcontractor, we need to verify:

• They had their own valid WC insurance (with a COI),
• Or they qualified as independent under labor laws, which may include:
  • Not being under your direction or control,
  • Working independently for multiple clients,
  • Supplying their own tools,
  • And (in some states) having a valid exemption or waiver.

Note: Each state may define independence differently. We follow applicable state rules, as well as standards from the National Council on Compensation Insurance (NCCI)

3. What happens if I can’t provide a valid COI or waiver? 
According to workers’ compensation rules, if a subcontractor lacks valid coverage and their role meets the definition of an employee under state law or NCCI guidelines, their cost will be included as an exposure. If the subcontractor:

• Did not provide WC coverage, and
• If their work was essential to your business or performed under your control, then their labor cost will likely be included in your audit and factored into your premium.