Underreporting payroll is the practice of intentionally not disclosing the full amount of payroll a business disburses to employees each pay period.
Workers’ compensation insurance premiums, as well as taxes for unemployment insurance, Social Security, and Medicare are based on payroll data. Organizations are required by law to accurately and fully report payroll.
As it relates to workers’ compensation insurance, the underreporting of payroll is often deliberate to obtain a lower premium.
However, some underreporting is not intended and could be caused by administrator error or accounting mistakes. Some methods used by fraudsters to intentionally and materially reduce premiums include:
● Not reporting the trade of goods and services
● Not declaring cash wages - under the law, all money earned regardless of amount must be declared as part of the total payroll.
The material and intentional underreporting of payroll is a serious crime that may result in civil or criminal penalties. Take the steps today to review your payroll practices to help prevent your business from underreporting.
To learn more about how EMPLOYERS® combats fraud, click here