Do I Really Need to Keep All of This Paperwork?
Regardless of how long you have been in business, or whether your business is a partnership, limited liability company, sole proprietorship, or corporation, it is imperative that you keep good business records. However, if you have years of paperwork and documentation piling up on the shelf or in file cabinets, you may be wondering just how long you need to hang on to all of those records. Here are a few guidelines for how long you need to keep those important documents:
Employee Records
State and federal laws require that you keep accurate personnel and payroll records for all employees that you hire. According to the Fair Labor Standards Act, you must keep all basic payroll records for three years for workers who are hourly. This includes their name, address, Social Security number, birthdate if they are under 19, occupation, and gender. Documentation should also include the date and time their work began, how many hours each day they worked, the amount of hours worked each week, how their wages were paid (weekly, hourly, etc.), their rate of pay, and overtime earnings.
Employers are also required to keep payroll records in which wage calculations were made such as piece work tickets, time cards, work and time schedules, wage rate tables, and any additions or deductions that were made from wages for a period of two years.
In addition to payroll information, the Equal Employment Opportunity Commission requires that businesses keep personnel records for one year. This includes application forms, records regarding hiring, termination, transfer, or layoff; tenure; and selection for apprenticeship and training. Records regarding sick time, vacation time, and attendance must be kept for a period of three years. Plan benefits for employees must be kept for six years according to the Employee Retirement Income Security Act.
Tax Records
The type of business you have, where you do business, and the number of employees you have determine which records you must keep. When it comes to federal taxes, you must show your gross income and any credits and deductions made. You will also need to retain documents that prove purchases, payroll, sales, and other transactions. These should be kept for as long as they may be needed for the Internal Revenue Code, which means the period of limitations for your tax return. Generally, this period is three years unless you have failed to report income, failed to file a tax return, or filed a fraudulent return. Because these situations can trigger a six-year statute of limitations, it is recommended that you keep your returns for at least six years.
Tax returns themselves should be retained forever. The limitation periods above begin when the tax return is filed. Having the return itself to prove that you filed, signed the return, and proof that you filed online or mailed the return should be indispensable.
Contact an Experienced Business Planning Attorney Today
If you have questions about the records you should be keeping for your business, Tampa business transaction attorney David Toback can help. Contact our office today to schedule a consultation and let us ensure that you are taking all the appropriate steps to ensure that your business is operating legally and as smoothly as possible.
Resources:
dol.gov/general/topic/retirement/erisa
dol.gov/whd/regs/compliance/Digital_Reference_Guide_FLSA.pdf
https://www.davidtobacklaw.com/some-laws-dont-apply-to-your-small-business/
