When you’re clearing out files to make room for the new year, make sure you don’t accidentally throw away your employees’ records! That’s because the IRS requires businesses to keep tax-related employment records for a MINIMUM of four years. Even if space is tight in your filing cabinets, you need to make room for the documents required by the tax authorities.
Federal requirements for employer record keeping are that you maintain documentation on all employees for no less than four years. You need to save the following documents:
- Your EIN
- Employee names, addresses, and SSNs
- Amounts and dates of wages and other payments
- Dates of employment
- Copies of all employees’ tax forms
- Any W-2s that were returned (as undeliverable)
- Tip amounts and allocation documentation
- Copies of all filed tax returns
- Amounts and dates of all tax deposits
- Any other documentation related to employees, payments, and taxes
It may not seem like a big deal to go ahead and toss some of these files a little early, but the consequences are very serious. A “willful failure” to maintain these employment tax records is punishable by imprisonment (up to one year) and substantial fines (up to $25,000 or $100,000 for corporations). Don’t make the mistake of throwing away any employment records before the four-year minimum holding period has passed. If you’re running low on space for storing your files, a new filing cabinet is a much cheaper solution than the potential fines!
Have questions about employment tax records? Taxation Solutions, Inc. can help businesses large and small with a full range of tax concerns. Contact us now for additional information.