It may be time to clean up your old payroll files, and that means figuring out what stays and what goes. Sizable penalties and large settlement awards are in your future if you’re unable to provide required information when requested by the IRS or an employment-related lawsuit. And no one wants that.
So, what documents should you keep? Here's a brief guideline:
Keep records regarding health insurance, cafeteria, educational assistance, adoption assistance and dependent care assistance plans providing benefits yet excluded from income if they're needed to determine whether the plan meets requirements for excluding the benefit amounts from income.
Records substantiating info returns and employer statements to employees regarding tip allocations should be retained for at least three years after the due date of the return or statement.
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