Payroll Record Retention Requirements

Every business must retain certain records on their current and past employees, but which ones and for how long?

On the federal level, there are two agencies that regulate record keeping. First is the IRS, which is responsible for enforcing the Internal Revenue Code. The second is the U.S. Department of Labor (DOL). The Wage and Hour Division of the DOL is responsible for enforcement of the Federal Fair Labor Standards Act (FLSA), the Family and Medical leave Act (FMLA), the Immigration Reform and Control Act (IRCA), and the laws governing wages paid by federal government contractors.

Both of these agencies have separate rules regarding the type of records that must be kept and the length of time you must keep the records. To further complicate your requirements there are numerous state, local and other regulatory agencies that may require additional record keeping. State agencies enforce State Unemployment Insurance Tax Acts, state wage and hour laws, child support and creditor garnishment laws and unclaimed or abandoned wage requirements.

Keeping these records accurate and up-to- date is extremely important to the health of your business. Without the proper records you will be unable to meet regulatory requirements should you be audited by any of various federal state and local agencies. Failing to meet these requirements can mean large penalties and the potential for large settlement awards should you be unable to provide the required information when requested.

Internal Revenue Service

The following records must be kept for four years after the tax due date or the actual date paid.

• Name, address, occupation, and social security number of each employee
• 
  
  Total compensation and date paid including tips and non-cash payments
• 
  
  Compensation subject to withholding for federal income, social security and Medicare tax
• Pay period for each compensation period
• 
  
  Explanation of difference in total compensation and taxable compensation
• 
  
  Employees' W-4 Form
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  Dates of employment (beginning and ending)
• 
  
  Employee tip reports
• 
  
  Wage continuation made to an absent employee by employer or third party
• 
  
  Details of fringe benefits provided to employee
• 
  
  Copy of employee's request to use the cumulative method of wage withholding
• 
  
  Adjustments or settlement of taxes
• 
  
  Amounts and dates of tax deposits
• 
  
  Total compensation paid to employee during calendar year
• 
  
  Compensation subject to FUTA
• 
  
  State unemployment contributions made
• 
  
  All information shown on 940
• 
  
  Copies of returns filed (941, 643, W-3, Copy A of Form W-2 and returned W-2 forms)

• Employee's name as it appears on social security card
  
• 
  Complete home address and date of birth if under age 19
• 
  
  Sex and occupation
• 
  
  The beginning of the employee's work week Regular rate of pay for overtime weeks
• 
  
  Hours worked each workday and workweek
• 
  
  Straight-time earnings including the straight –time portion of overtime earnings
• 
  
  Overtime premium earnings
• 
  
  Total wages paid for each pay period including additions and deductions
• 
  
  Date of payment and pay period covered
• 
  
  Records showing total sales volume and goods purchased
• 
  
  Following records must be kept for two years after the last date of entry
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  Employment and earnings records, employee hours of work, basis for determining wages and wages paid
• 
  
  Order, shipping and billing records showing customers orders and delivery records
• 
  
  Wage rate tables and piece rate schedules
• 
  
  Work time schedules that establish hours and days of employment

• name
• 
  address
• 
  date of birth
• 
  occupation
• 
  pay rate
• 
  compensation earned

• job applications
• 
  resumes
• 
  response to advertised job openings
• 
  records related to the failure to hire an individual

• layoff or discharge of an employee
• 
  job orders submitted to a placement agency
• 
  employee administrated by employee physical exams used to make personnel decisions
• job advertisements

Article Source: http://articlesmore.com

Charles J. Read, CPA has been in the payroll, accounting and tax business for 30 years, the last fifteen in private practice. Mr. Read is the author of “How to Start a New Business.” To find professional payroll service at a budget price go to www.PayrollonaBudget.com a paperless payroll company. For a full service payroll bureau with CPA’s on staff visit www.CustomPayroll.com . See an excerpt of Mr. Read’s interviews from William Shatners “Heartbeat of America” television show on the web sites linked above.

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