How Long Should You Keep Payroll Records?

Keeping a record of your payroll serves several important purposes, and in some cases, it is required by law. Additionally, how you manage and store payroll records is important, and some industries have specific requirements regarding the secure storage of payroll records. This is sometimes the case with government-related accounts, but other sensitive industries are affected as well.

Why Should You Keep Payroll Records?

Having the ability to recall payroll records is crucial for legal protection. If an employee determines at some point in the future that they believe improper payment from the past was issued for their services, you may need to provide documentation to prove that the employee was compensated according to their contract.

Also, if tax issues come up in the future, you may need to utilize a bookkeeping payroll tool to pull archived information to demonstrate that taxes were paid properly. In most cases, you’ll need to keep tax records related to payroll for a minimum of seven years.

Your bookkeeping can also benefit from keeping payroll records. If an accounting error is caught in the future, you may need to unravel a trail of paychecks to catch exactly where the problem stemmed from. This can save you time, money, and a lot of headaches when trying to solve complicated matters related to tax, benefits, deductions, and your overall accounting.

The Fair Labor Standards Act

Regardless of your industry, the Fair Labor Standards Act requires that all business owners retain payroll records for two years. To ensure that you remain in compliance with these regulations, it’s recommended that you utilize an automated bookkeeping payroll tool.

These kinds of tools will generally provide you with date information for your payroll records so that you can look through your archive and ensure that your records comply. This can also help you if you need to find specific records fast to produce them for employees, ex-employees, court cases, and the Internal Revenue Service.

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