Is your office getting cluttered with paperwork? Are you trying to decide what documents to keep? It can be confusing trying to figure out and remember what forms to keep, for how long and why.
As a general rule, you are able to get rid of interview materials after a year. Payroll records, on the other hand, should be kept for at least three years, and records of employment taxes should be kept on hand for four years.
In this article, we will go into even greater detail about payroll records, what they are, how long to keep payroll records, why and how to get rid of them once the retention date comes.
What are Payroll Records?
Payroll records are documents that contain information regarding an employee’s paychecks. These records may cover anything including hours, pay rate, taxes and other financial concerns. These documents may be in either a physical or digital form.
Payroll records include:
- Employee’s name and Social Security number
- If they are over 19, you don’t need to worry about this
- Hours worked per day
- Hours worked per week
- Salaried or hourly pay
- Pay rate
- Total regular earnings
- Total overtime earnings
- Pay period
- W-2, W-3, W-4, W-5 forms
- 941 and 944 forms
- Records of benefits, garnishments, etc.
Why do you need to keep payroll records?
As with anything dealing with records or the IRS, keeping records on hand ensures you will not be charged any fines or receive penalties from the IRS. Additionally, careful record keeping protects you and your business from potential legal trouble. With the right documents, you can disprove any statements about a lack of payment or things of that nature. Of course, it also just helps you stay organized and in control of your business.
How do you dispose of these and other important documents once the time is up?
After the retention date, you can destroy the papers by shredding them in your office. You can also hire a company that does on-site shredding if you have a lot of documents to get rid of. This will ensure that all confidential documents are not only destroyed but properly disposed of.
If the records are digital, use the Department of Defense protocol. This protocol prevents any data recovery both through software or hardware.
Finally, it is important to keep a log of what you’ve destroyed. Include what documents they were, how they were destroyed, when they were destroyed and by whom. Keeping track of who disposed of the documents holds them liable if there is a question about said document.
Bottom Line: Careful Record Keeping Guarantees a Safe, Secure Business
Keeping so many payroll records around for a long period of time may feel like too much extra clutter; however, these records can help you ensure that you always have access to the information you need when you need it. The good news is that there are many different ways to manage all these records without getting overwhelmed.
For more information, the Fair Labor Standards Act (FLSA) that establishes the regulations for minimum wage, overtime pay, recordkeeping and employment standards for youth has this helpful document that explains in more detail what records to keep and why.