Tax Insights

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Payroll Records…What Do I Need to Save?

Earlier this year, the IRS and Social Security Administration offered advice to employers in the Spring 2015 SSA/IRS Reporter on payroll record retention.

The general record retention rule for payroll records applies to any employer that withholds and pays federal income, Social Security and Medicare taxes. The SSA/IRS Reporter says records relating to the above taxes must be kept for at least four years after the due date of the employee’s personal income tax return (generally April 15) for the year in which the payment was made.

The list of payroll records to retain includes:

  • The Employer Identification Number (EIN);
  • The employee’s name, address, occupation, and social security number;
  • The total amount and date of each payment of compensation and amounts withheld for taxes or otherwise, including reported tips and the fair market value of non-cash payments;
  • The amount of compensation subject to withholding for federal income, social security, and Medicare taxes, and the corresponding amount withheld for each tax (and the date withheld if withholding occurred on a different day than the payment date);
  • The pay period covered by each payment of compensation;
  • Where applicable, the reason(s) why total compensation and taxable amount for each tax rate are different;
  • The employee’s Form W-4, Employee’s Withholding Allowance Certificate;
  • Each employee’s beginning and ending dates of employment;
  • Any statements provided by the employee reporting tips received;
  • Fringe benefits provided to employees and any required substantiation;
  • Adjustments or settlements of taxes; and
  • Amounts and dates of tax deposits.

A copy of the Spring 2015 SSA/IRS Reporter is available on the SSA.gov website.

By Melinda Nelson, CPA