Your payroll records need to be accurate and complete and you need to keep them as long as the US Department of Labor and IRS require. Making certain that your payroll records are organized by date and type will help make sure that you have records available for as long as you need them and can dispose of those that are no longer needed. By digitalizing all records, you can reduce the clutter and burden of keeping old paper copies of documents for years. And, once you can safely get rid of paper payroll records, shredding them is the best course of action. Outsourcing your payroll functions to a competent accounting firm like Exigo Business Solutions in the Kansas City area is a good way to make sure that the job is done right now and always.
Your payroll records should include all of the information relating to the checks you pay your employees with. This information needs to cover the hours that folks worked, their wages, and benefits or other important info related to their pay. While payroll records can be physical or digital, the better choice over time is to go the digital route. Digital records are easier to work with, easier to store, and easier to access when needed.
Your payroll records should be in compliance with provisions such as minimum wages and overtime pay dictated by the Fair Labor Standards Act. Payroll records include the following:
Full name and SSAN
Current address including zip code
Gender and birthdate (if younger than 19)
Workweek hours (days and times)
Work hours each day
Total work hours each week
If an employee is paid hourly or on a salary
Base hourly rate of pay
Total daily and weekly earnings (straight time)
Total workweek overtime earnings
Each and every deduction from or addition to employee wages
Total paid wages for every pay period
Pay periods and payments dates
Forms W-2, W-3, W-4, W-5
Forms 941 and 944
Records of all benefits
Your payroll records document actions that you took and decisions that you made just like with all of your business records. They help you prove, if need be, that you followed state and federal regulations. But, more importantly, they help you properly manage your business.
According to the U.S. Equal Employment Opportunity Commission website regarding bookkeeping requirements, all employment records including payroll must be kept for one year and for a year after the date of termination of employment. The Age Discrimination in Employment Act of 1967 requires that payroll records be kept for three years. And, seniority and merit systems of pension and insurance plans plus related documentation must be kept for as long as the plan or system is in effect and for one full year thereafter. The Fair Labor Standards Act requires that payroll records be kept for at least three years and that all records of job evaluations, wage rates, bargaining agreements, and merit or seniority systems are kept for at least two years.
In the case that a lawsuit is filed that relates to any of the acts mentioned, the records need to be kept during the timeframe (90 days) described by statute for those bringing suit.
The IRS requires that you keep all employee payroll records for four years following the end of the fourth quarter for the year. In cases where the IRS may allege fraud, there is no time limit to keeping records. And, you may be required to keep payroll records by the the Family Medical Leave Act (FMLA) and the Employee Retirement Income Security Act (ERISA).
The short answer is no. Storing old documents for years can become costly and lead to security issues as well. Whatever you do choose to keep, digitalize it and put it in the cloud using a program like SmartVault.
An excellent reason to digitalize your payroll records along with all other significant financial data is that you can run custom reports with tools like QuickBooks to see how your business is doing. You can spot both problems and opportunities and constantly strive for a more efficient and profitable business. By effectively tracking payroll you help keep hidden employee costs in check including any dishonest activities by employees or those handling your payroll.
The chief reason to outsource bookkeeping, payroll, and doing your taxes is to get the job done right, not to save money as is the common misconception. Meticulous payroll records and processing get the job done efficiently and cost-effectively. Using an expert like Exigo Business Solutions makes sure that the appropriate records are stored for as long as is necessary and that information from your payroll can be used to improve the functioning of your business. You want someone who knows all federal regulations and guidelines and those of your state and local authorities as well. For any questions about how to keep you payroll records accurate and the payroll process efficient, contact us at Exigo Business Solutions today.