As an employer, you are responsible for keeping accurate payroll records for your employees. But how long should these records be kept? To help steer you in the right direction, let’s discuss the importance of retaining accurate payroll records and provide guidelines on how long to keep them.
Why Keep Accurate Payroll Records?
Maintaining accurate payroll records is essential for any business. Not only do they help employers stay compliant with federal, state and local laws, but they also provide valuable insights into the financial health of a company. By having a clear picture of the amount of money going out in wages each month and year, companies can make informed decisions about budgeting, planning and expanding their businesses.
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How Long to Keep Payroll Records?
The federal government requires employers to retain certain payroll records for at least three years after an employee’s last day of work. This includes all tax documents related to the employee (W-2s, 1099s), as well as pay stubs and time cards. However, some states may have different requirements when it comes to how long certain payroll records must be kept; employers should familiarize themselves with their local laws regarding record retention prior to discarding any documents.
In addition to legal requirements, it’s also important that employers keep accurate financial data in order to protect against potential claims or lawsuits from former employees. For example, if someone challenges the accuracy or validity of their wages or other compensation payments during that three year period following their last day of work, employers will need access to those documents in order to defend themselves or respond appropriately. Therefore, it may be best practice for employers to keep all payroll records indefinitely until they are absolutely sure they are no longer needed.
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Payroll records are an essential part of running a business and should never be taken lightly. Keeping accurate and up-to-date payroll records will help ensure that you comply with all relevant regulations and minimize potential legal issues down the line. Generally speaking, employers in the US are required to keep their payroll records on file for at least three years after they were created; however, this timeframe can vary depending on what type of information is being stored. By understanding the rules surrounding payroll record retention and staying organized with your paperwork, you will be able to put yourself in a better position both legally and financially!