Many employers have questions about payroll records and how long they should be kept. The Internal Revenue Service has its own list of requirements, which you need to know. Here’s the answers to the titular question, as well as other noteworthy payroll record related questions.
How Long Should Employment And Payroll Records Be Kept?
All records related to payroll and employment should be kept for a minimum of three years after the date in which it was filed. It is not necessary to keep these records indefinitely, although online payroll software allows you to store them much easier and with greater security.
How Should The Records Be Maintained?
The IRS says that you can choose any system of record keeping which is suitable to your business, so long as it thoroughly displays your expenses and income. The records, particularly those related to payroll taxes, should be kept organized and in a safe location. It is highly recommended to structure these records by the type of expense and income as well as the year.
Which Records Should Be Kept?
- The most important payroll related records to maintain include:
- Copies of employee forms W-3 and W-2
- Copies of employee forms W-5 and W-4
- 944 and 941 Forms
- Employment dates for each employee
- Records of any benefits which were given to employees
- Special pay such as for sick leave
- Addresses, social security numbers and employee names
- Travel vouchers or other types of reimbursements for employees
- Canceled checks, deposits made and receipts
Best Practices For Maintaining Employee Records
Each employee should have their own personnel file. This file will have documents which are confidential and which will be handled primarily by the human resources department and should be restricted to them. Payroll files can also be used to manage employee records. They will typically have a history of the jobs the employee worked in, as well as the departments and changes to their compensation.
Many employers also maintain medical files of their employees. These files are some of the most sensitive and confidential and as such should always be restricted to human resources. These files will contain details such as notes from doctors, paperwork for FMLA, information involving drug tests and other documents that is related to the health status of an employee or their family.
One of the most important file types that employers should be aware of is the I-9. Also known as the Employment Eligibility Verification, it is an immigration form used in the United States to determine the identity of employees working in the country. This form should always be kept in a location which is separate from the other files so that if your company is subjected to an I-9 review from the government you will have the documentation readily available.
Best of all, by keeping the I-9 files separate from other employee documents it ensures that government workers will not be given access to data that they shouldn’t be allowed to see, such as employee medical records. I-9 investigations have increased in recent years so it is important to be organized otherwise you could face fines or other penalties.