Learn the How and Why of Payroll Records Retention
As a business owner, you’re probably already aware of the importance of maintaining all your paperwork and documents. There is certainly plenty to do. However, properly maintaining payroll records is just another important piece of the puzzle. IRCH not only provides the services you need to better maintain all the documents required, but we also want to make sure that you know how and why it is important to retain your payroll records.
Payroll Retention and Taxes
The importance of payroll records retention is largely due to the requirements set forth by the IRS for payroll taxes. Also referred to as employment taxes, payroll taxes are paid to both the state where you operate your business and the federal government. In the event of a payroll tax audit, you will need to be able to prove that the information you provided on your tax forms is accurate. The best ways to do that are to have documentation of every payroll payment made over the course of the year and to keep up with changes in federal and state laws.
Which Payroll Records Should Be Retained?
The simplest answer to this question is all of them. As an employer, you should have access to the information that shows details about how and when employees are receiving their income. A more detailed list of the payroll records that should be maintained includes:
- Employer ID number (EIN)
- Employer tax forms and payment receipts
- All IRS notifications pertaining to payroll
- Amount of tips reported along with a list of tipped employees
- Date and amounts of all wages paid, plus annuity and pension payments
- Employee information including address, contact information, job titles, and dates of employment
How Long to Maintain Payroll Records
According to the federal government, employers are required to keep all payroll records on hand for a minimum of four years. However, state laws may require a longer period of record retention. Check with a business attorney in your state to get an accurate answer regarding state laws, but most experts encourage business owners to keep records for seven years.
Proper record-keeping protects your business as you strive to comply with both state and federal regulations. Consulting a trusted company such as IRCH can help you make sure you’re operating within the framework of the law.