Payroll Record Retention Requirements

Every business must retain certain records on theirof overtime earnings
current and past employees, but which ones and forOvertime premium earnings
how long?Total wages paid for each pay period including
On the federal level, there are two agencies thatadditions and deductions
regulate record keeping. First is the IRS, which isDate of payment and pay period covered
responsible for enforcing the Internal Revenue Code.Records showing total sales volume and goods
The second is the U.S. Department of Labor (DOL).purchased
The Wage and Hour Division of the DOL is responsibleFollowing records must be kept for two years after
for enforcement of the Federal Fair Labor Standardsthe last date of entry
Act (FLSA), the Family and Medical leave Act (FMLA),Employment and earnings records, employee hours of
the Immigration Reform and Control Act (IRCA), andwork, basis for determining wages and wages paid
the laws governing wages paid by federal governmentOrder, shipping and billing records showing customers
contractors.orders and delivery records
Both of these agencies have separate rules regardingWage rate tables and piece rate schedules
the type of records that must be kept and the lengthWork time schedules that establish hours and days of
of time you must keep the records. To furtheremployment
complicate your requirements there are numerousDepartment of Labor
state, local and other regulatory agencies that mayIn addition to the general requirements of both the IRS
require additional record keeping. State agenciesand the DOL mandated by several federal acts. They
enforce State Unemployment Insurance Tax Acts,are:
state wage and hour laws, child support and creditorFamily and Medical Leave Act
garnishment laws and unclaimed or abandoned wageBasic payroll and employee data
requirements.Dates FLMA leave is taken
Keeping these records accurate and up-to- date isHours worked by employee in last 12 months
extremely important to the health of your business.Hours of FLMA leave for exempt employee
Without the proper records you will be unable to meetCopies of employee notice to employer
regulatory requirements should you be audited by anyCopies of general and specific notes given to
of various federal state and local agencies. Failing toemployees
meet these requirements can mean large penaltiesCopies of policy regarding taking of paid and unpaid
and the potential for large settlement awards shouldleave by employee
you be unable to provide the required informationDocuments verifying premium payments of employee
when requested.benefits
Internal Revenue ServiceRecords of FLMA leave disputes between employee
The following records must be kept for four yearsand employer
after the tax due date or the actual date paid.Title VII of the Civil Rights Act of 1964 and the
- Name, address, occupation, and social securityAmericans with Disability Act of 1990 have no general
number of each employeerecord requirement under the law, but to meet the
Total compensation and date paid including tips andrequirements all records relating hiring, promotion,
non-cash paymentsdemotion, transfer, layoff or termination, rates of pay,
Compensation subject to withholding for federaland selection for training or apprenticeship should be
income, social security and Medicare taxkept for one year from date of action.
- Pay period for each compensation periodThe Age Discrimination in Employment Act of 1967
Explanation of difference in total compensation andrequires that you keep the following records for three
taxable compensationyears:
Employees' W-4 Form- nameaddressdate of birthoccupationpay
Dates of employment (beginning and ending)ratecompensation earned
Employee tip reportsYou also keep the following for one year from the
Wage continuation made to an absent employee bydate of action:
employer or third party- job applicationsresumesresponse to advertised job
Details of fringe benefits provided to employeeopeningsrecords related to the failure to hire an
Copy of employee's request to use the cumulativeindividual
method of wage withholdingYou also must keep all records related to
Adjustments or settlement of taxes- layoff or discharge of an employeejob orders
Amounts and dates of tax depositssubmitted to a placement agencyemployee
Total compensation paid to employee during calendaradministrated by employee physical exams used to
yearmake personnel decisions
Compensation subject to FUTA- job advertisements
State unemployment contributions madeThe Immigration Reform and control Act requires that
All information shown on 940you must retain copies of the I-9 Form for three years
Copies of returns filed (941, 643, W-3, Copy A ofafter the date of hire.
Form W-2 and returned W-2 forms)Charles J. Read, CPA has been in the payroll,
Department of Laboraccounting and tax business for 30 years, the last
The following records must be kept for three yearsfifteen in private practice.
after date of last entry.Mr. Read is the author of "How to Start a New
- Employee's name as it appears on social securityBusiness."
cardTo find professional payroll service at a budget price
Complete home address and date of birth if under agego to a paperless payroll company.
19For a full service payroll bureau with CPA's on staff
Sex and occupationvisit .
The beginning of the employee's work week RegularSee an excerpt of Mr. Read's interviews from William
rate of pay for overtime weeksShatners "Heartbeat of America" television show on
Hours worked each workday and workweekthe web sites linked above.
Straight-time earnings including the straight -time portion