How Long Should You Keep Payroll Records?

Payroll record-keeping isn't optional — it's a legal requirement. Federal and state agencies can audit your payroll records years after the fact, and if you can't produce them, you have no defense. Here's what to keep and for how long.

The IRS requires you to keep payroll tax records for at least 4 years after the tax is due or paid, whichever is later. This includes:

• Copies of all W-2s and W-3s
• Copies of all 1099-NECs
• Records of all payroll tax deposits
• Copies of Form 941 and Form 940
• Employee W-4 forms

The Fair Labor Standards Act requires employers to keep payroll records for at least 3 years:

• Employee name, address, and Social Security number
• Date of birth (if under 19)
• Sex and occupation
• Hours worked each day and week
• Wages paid each pay period

Keep Form I-9 for 3 years from the date of hire or 1 year after employment ends, whichever is later.

State record retention requirements vary. Some states require longer retention periods than federal law. Check your state's labor department requirements.

• Store records digitally with secure backups
• Organize by year and employee
• Use payroll software that maintains records automatically
• Don't delete records just because an employee has left

In a Department of Labor audit, missing records are presumed to favor the employee. In an IRS audit, missing records mean you can't substantiate your payroll tax filings. Either way, the consequences are expensive.

Professional payroll services maintain your records automatically. The Gap ProAdvisors handles payroll processing and compliance for small businesses. Contact us or see our pricing.