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Are you familiar with all of the payroll recording requirements?

There is no one true rule book for records retention, and this can make life for the average payroll and human resource professional a challenge! This is particularly true when navigating the maze of complicated publications and other materials used in preparing a company records retention policy.

Basically, there are two major federal agencies regulating payroll record keeping: the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL), Wage and Hour Division. The IRS enforces the Internal Revenue Code. The DOL enforces the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), the Immigration Reform and Control Act (IRCA) and many others. Although Immigration Reform now falls under the umbrella of Homeland Security, the DOL still enforces the regulations.

You still need to deal with the maze of state, local and other agency regulations that may fall within the realm of your business' operations, but here is a summary of key regulations of the IRS and DOL regarding document retention:

Internal Revenue Code
Retain the following for four years after the due date of the tax or the date the tax is actually paid (if later) for the return period to which the records relate:

• Employee name, address, occupation and Social Security number.
• Total amount and date of each payment of compensation and any amounts withheld for tax -- including reported tips and the fair market value of non-cash payments.
• Amount of compensation subject to withholding for federal income, Social Security and Medicare taxes, and the amount withheld for each tax.
• Pay period covered by each payment of compensation.
• Reasons why the total compensation and the taxable amount for each tax are different.
• Employee's Form W-4, Employee's Withholding Allowance Certificate.
• Beginning and ending dates of the employee's employment.
• Statements provided by the employee reporting tips received.
• Information regarding wage continuation payments (i.e., Third Party Sick Pay).
• Fringe benefits provided to the employee and any required substantiation.
• Requests from an employee to use the cumulative method of wage withholding.
• Adjustments or settlements of taxes.
• Copies of returns filed, including forms 941, 943, W-3 and Copy A of Form W-2, including Forms W-2 sent to employees and returned as undeliverable.
• Amounts and dates of tax deposits.

Federal Unemployment Tax Act (FUTA)
Retain the following for four years after the due date of Form 940 or the date the required FUTA tax was paid, whichever is less:

• Total amount of employee compensation paid during the calendar year.
• Amount of compensation subject to FUTA tax.
• State unemployment contributions made.
• All information shown on Form 940.
• Reason why total compensation and the taxable amounts are different.

Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) does not specify any particular format for record retention. The requirements state that the records must be accurate, complete, understandable and available for inspection within 72 hours upon request by the Wage and Hour Division. They must also be kept safe and accessible either at the worksite or at a central location where records are customarily maintained.

Retain the following for two years after last date of entry:

• Basic employment and earnings records supporting the data for each employee's hours of work, basis for determining wages and wages paid (time cards).
• Order, shipping and billing records showing customer orders, shipping and delivery records and customer billings.
• Records substantiating any additions to or deductions from each employee's wages.

Retain the following for two years after last effective date:

• Wage rate tables and piece rate schedules.
• Work time schedules that establish hours and days of employment.

Retain the following for three years after last date of entry:

• Name as it appears on the employee's Social Security card.
• Complete home address.
• Date of birth, if under age 19.
• Sex and occupation (for use in determining Equal Pay Act compliance).
• The beginning of the employee's workweek (time and day).
• Regular rate of pay for overtime weeks, the basis for determining the rate, and any payments excluded from the regular rate.
• Hours worked each workday and workweek.
• Straight-time earnings (including the straight-time portion of overtime earnings).
• Overtime premium earnings.
• Additions to and deductions from wages for each pay period (for example, bonuses, withheld taxes, benefits contributions, garnishments).
• Total wages paid for each pay period.
• Date of payment and pay period covered.

Retain the following for three years after last effective date:

• Collective bargaining agreements.
• Certificates authorizing the employment of industrial home workers, minors, learners, students, apprentices and workers with disabilities.
• Records showing total sales volume and goods purchased.

Family and Medical Leave Act
Retain the following for three years in an accessible format:

• Basic payroll and employee data (as required by FLSA).
• Dates FMLA leave is taken, if taken in increments.
• Hours worked in the previous 12 months.
• Hours of FMLA leave for exempt employees.
• Copies of employee notices furnished to employer, if in writing.
• Copies of general and specific notes given to employees.
• Documents describing employee benefits or employer policies regarding taking paid and unpaid leave.
• Documents verifying premium payments of employee benefits.
• Records of FMLA leave disputes between employees and employers.

Immigration Reform and Control Act
This law prohibits employers from hiring people who are not authorized to work in the United States. The retention period for the Form I-9, Employment Eligibility Verification, is determined at the time of an employee's termination. It is three years after the hire date or one year after the termination date, whichever is later.

The information provided is a summary of certain key IRS and DOL regulations. Visit the following Web sites for detailed information on all of the regulations:

Internal Revenue Service
U.S. Department of Labor, Wage and Hour
U.S. Citizenship and Immigration Services