Probably one of the most asked questions we get is, “So what records should we keep and for how long?”
What we say is, “It depends.” So, let me explain.
For payroll records — Keep federal for at least three years; keep Nevada for at least four years.
For Fair Labor Standards Act (FLSA) — An employer must keep information on each employee (full name, Social Security number, address, birth date, sex, occupation, time and day of the week when workweek begins, hours worked each day, total hours worked each workweek, basis of pay, rate of pay, straight earnings paid, overtime earnings paid, all additions and deductions from ways, total wages paid each pay period, and date of each payment to the employee).
For the IRS — Keep such things as all payroll tax reports (forms 941, 940, W-3, and W-2), employee forms (W-4 and W-5), records of fringe benefits paid to employees and how the value was determined, employee info (names, addresses, and Social Security numbers), dates of employment for each employee, special pay (sick, vacation, etc.), travel vouchers, receipts/canceled checks for all payroll tax deposits, vendor or nonemployee payments including name, address and ID for each payee, dates of payment, form W-9, and description and purpose of payments made.
For the State of Nevada — Keep basically all the information needed under FLSA (adding information on state or states the services were performed by employee), copies of previously filed tax reports (Federal and Nevada), and work papers used to fill them out, and a detailed general ledger by period.
For sales tax records — Keep Nevada for at least three years. Copies of previously filed Sales/Use Tax Returns and related work papers used to fill them out, detailed general ledger by period, monthly sales registers/journals, sales invoices, resale certificates and exemption letters, all federal income tax returns filed, all purchase invoices, cash disbursement/check register, all credit card receipts and statements, asset listing/depreciation schedule, bank statements or cancelled checks, and cash register “Z” tapes (if any).
For Federal (IRS) Income Tax — Keep for at least three years (we prefer at least five years). All the information needed for the sales tax records, plus all 1099s issued, petty cash slips, all travel-transportation-entertainment-gift related documentation, as well as any other documentation related to income or deductions reported on the income tax return.
We suggest you add at least one additional year to the “required” time just to make sure you have what is needed if you get audited by any tax authority near the end of the open time period.
Finally, it is a good idea to at least keep a copy of every income tax return you file permanently. For historical and posterity value if nothing else.
Did you hear? Proverbs 9:9 says, “Give instruction to a wise man, and he will be still wiser; Teach a just man, and he will increase in learning.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. He is on the web at BullisAndCo.com and on Facebook.