How Long to Keep Tax Records
From Tax Guide.
Tax Guide · Arab, Alabama
Payroll Records: How Long Do You Have to Keep Them?
Employers should keep payroll records for at least four years after the tax is due or paid. See what to keep and how long other records last.
The short answer
How long do employers have to keep payroll records?
The IRS says employers should keep employment tax records for at least four years after the date the tax becomes due or is paid, whichever is later.
That is a minimum for federal employment tax records, not a rule that applies to every document. Other agencies have their own periods, and some records are worth keeping longer for your own protection. When in doubt, keep more rather than less.
This is different from the general three-year period for most income tax records. Our guide to how long to keep tax records covers those.
Retention periods are minimums, and they run in the background of ordinary business life. A practical approach is to set a yearly cleanup date, sort files by year, and shred only what is clearly past every period that could apply. If a review, audit or dispute is open, keep everything related to it until it is fully resolved, even if the usual period has passed.
What to keep
Which payroll records should I keep?
Keep any record that shows who you paid, how much, what you withheld and what you deposited or reported.
The IRS expects employment tax records to support the numbers on your returns. If a return is ever questioned, these are the records that answer it.
- Your employer identification number and each employee's name, address and Social Security number.
- Copies of each employee's Form W-4 and any later changes.
- Dates and amounts of wages, tips and other pay, and what you withheld from each payment.
- Records of tax deposits, with dates and amounts.
- Copies of filed returns, such as Form 941 and Form 940, and W-2 forms. See payroll tax deposits and Form 941.
- Records of any corrections, and of fringe benefits and sick or leave pay.
Other agencies
Do other rules require me to keep payroll records longer?
Yes, other rules can set different periods, so the four-year IRS guideline is not the only one that applies.
The table gives a general picture. Confirm the current rules for your situation, since they can change and can vary by workplace.
| Record | Typical guidance |
|---|---|
| Employment tax records (IRS) | At least four years after the tax is due or paid |
| Form I-9 | Three years after hire, or one year after employment ends, whichever is later |
| Payroll records under federal wage laws | Generally about three years |
| Time cards and wage rate tables | Generally about two years |
| State and local payroll records | Alabama has its own rules, and we check how they apply |
General guidance from federal agencies. Keeping records longer is usually harmless, and can help if a question comes up.
Keeping them safe
How should I store payroll records?
Store payroll records where they are organized, protected and easy to find, in either paper or electronic form.
Payroll files contain Social Security numbers and pay details, so treat them as private. Keep paper files locked, restrict who can open electronic files, and make a backup of the electronic ones. Keep the files organized by year so you can find a quarter quickly when a question arrives.
Electronic records are acceptable when they are complete, readable and can be produced when needed. If you scan paper records, keep the scans clear and confirm they open. Do not throw away the originals until you are confident the copies are usable. And when the retention period has ended, shred the records instead of putting them in the trash.
If something goes wrong
What if my payroll records are lost or incomplete?
If records are missing, you can often rebuild much of the picture from bank statements, filed returns and payment confirmations, though it takes work.
Start with what you still have: bank records, copies of deposits, prior returns and year-end forms. The agencies that receive your reports may also hold copies. Then write down how you rebuilt the numbers, and keep that with the file.
If a notice arrives and the records to answer it are incomplete, do not ignore it. Keep a copy and call the office. Our tax representation service can review the notice, explain the options and respond to the agency on your behalf. A clean set of W-2 and W-4 records helps a great deal.
How we can help
How Melton Tax Services can help with payroll records
Our payroll and bookkeeping service can help you keep payroll records organized so they are ready when you need them.
We can help with payroll and the records behind it. See our payroll and bookkeeping page, or start with hiring your first employee to set up files from day one.
To talk about your records, contact us or call 256-586-4635. We serve Arab and the surrounding area. Please do not send Social Security numbers or documents through this website. Bring them by the office or call us.
Answers
Questions about payroll record retention
Can I keep payroll records on my computer instead of on paper?
Generally yes, as long as the records are complete, readable and can be produced when someone asks. Keep a backup and keep the files private.
When does the four-year period start?
The IRS counts from the date the tax is due or paid, whichever is later. Because the start date can depend on how and when the tax was paid, ask us to help work out the date for your records.
Should I keep an employee's records after they leave?
Yes, for the same period. A former employee's W-4, pay records and I-9 remain part of your payroll files until the retention period runs out.
Do I keep copies of W-2s I gave to employees?
Yes. Employers should keep a copy of each W-2 with their employment tax records. If an employee loses theirs, you can usually provide a copy.
Is it a problem to keep records longer than required?
No, not usually. The concern is keeping them secure. Records that hold Social Security numbers should be protected, then shredded when you no longer need them.
What if I am a household employer?
Household employers have similar recordkeeping duties for their worker. See our guide to <a href="/guide/household-employer-and-nanny-taxes.php">household employer and nanny taxes</a> for the general picture.
Read next
Related reading
Payroll Tax Deposits and Form 941
From Tax Guide.
W-2 and W-4 Forms for Employers
From Tax Guide.
Hiring Your First Employee: Tax and Paperwork Guide
From Tax Guide.
Payroll and Bookkeeping
A service Melton Tax Services provides.
Melton Tax Services
Questions about your taxes or your business?
Our team in Arab is just a phone call away, and we are glad to talk it through with you.