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Payroll Records Compliance Training


Payroll Records, Recordkeeping, And Record Retention Requirements

From the paystubs for your employees' first payroll checks of the year to the Form W-2 at year-end, the Payroll Department creates thousands and thousands of records each year. And like most things involving the government, there are lots of forms and lots of payroll recordkeeping and record retention requirements.

Specifically, government agencies such as the IRS and the Department of Labor require employers to retain certain records.

The reason for this record retention is quite simple: if the agency wants to make sure that the employer is in compliance with its laws, it must be able to review the records produced. And it is your responsibility to ensure you have the right records. This includes knowing and complying with:

  • Payroll recordkeeping requirements by agency
  • State payroll record retention requirements
  • Electronic filing and reporting methods
This last point is important as more and more organizations move toward direct deposit and electronic banking, payroll personnel also must switch from a paper format to electronic accounting - making a complex process even more difficult.Payroll Training

Basic Requirements For Payroll Records

Payroll professionals must know and comply with payroll record retention requirements such for identifying, filing, retaining, protecting, and destroying your important payroll records, including:

  • Which records must you keep - and for how long
  • Various state record retention rules
  • How electronic retention rules differ from paper standards
  • How to know when it's safe to scan a document and dump the paper original
  • How and where to keep W2s, 1099s, payroll tax deposits, quarterly payroll tax returns, yearly summary reports to government agencies, and other year-end forms
  • How to handle special forms such as local tax forms, prevailing wage reports, government contract requirements, etc.
  • Electronic I-9s: How to comply with the federal rules on completing, signing, and retaining
  • The four steps you must include in your electronic I-9 program
  • The Lilly Ledbetter Fair Pay Act for payroll record retention requirements
  • Whether payroll records be kept separate from HR records?
  • How to destroy records
What Payroll Forms Must Be Filled Out And Retained?

There are numerous state and federal laws governing payroll records and payroll record keeping requirements and affiliated forms. These payroll forms include:

  • Form 1099
    Form 1099 is used to report various types of income other than wages, salaries, and tips

  • Form 1099-MISC
    The Form 1099-MISC, Miscellaneous Income, is used to report earnings other than wages to persons or companies other than employees.

  • Form 940
    Employers use the Form 940 Employer?s Annual Federal Unemployment (FUTA) Tax Return to report their annual FUTA tax. FUTA tax, together with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs.

  • Form 941
    Each quarter, all employers who pay wages subject to federal income tax withholding (including withholding on sick pay and supplemental unemployment benefits) or social security and Medicare taxes must file Form 941, Employer's Quarterly Federal Tax Return, by the last day of the month that follows the end of the quarter.

    Reporting and reconciling taxes also may be done on forms other than the Form 941. This may be due to the type of employer or the frequency required. The following forms are also used to report taxes withheld:

    • Form 941M
    • Form 941-PR
    • Form 941-SS
    • Form 943
    • Form 944
    • Form 945

  • Form W-2
    Form W-2 is a six-part form (Copies A-D and 1 & 2) used to report the wages and benefits paid to an employee and the taxes withheld from those wages. Employers must produce the Form W-2 for each employee at the end of each calendar year.

    This form is used to inform both the employee and the taxing agencies how much the employee received in wages and what taxes were withheld and paid. It also includes information on fringe benefits paid and state and local taxation.

  • Form W-3c
    Form W-3c is used for transmittal of corrected wage and tax statements.

  • Multiple Worksite Report
    The Multiple Worksite Report (MWR) Form asks most multi-location employers to provide employment and wage data for all of their establishments covered under one Unemployment Insurance (UI) account in a state.

  • Special Circumstances Reporting
    Forms for "special circumstances" include:Payroll Training

    • Adoption Benefits
    • Agent Reporting
    • Clergy and Religious Workers
    • Deceased Employee's Wages
    • Designated Roth Contributions
    • Educational Assistance Programs
    • Employee Business Expense Reimbursements
    • Employee's Taxes Paid By Employer (Gross ups)
    • Fringe Benefits
    • Golden Parachute Payments
    • Government Employers
    • Group-Term Life Insurance
    • Health Savings Account
    • Moving Expenses
    • Non-Qualified Deferred Compensation Plans
    • Repayments
    • Scholarship and Fellowship Grants
    • Sick Pay

  • Required Notice To Employees
    The Payroll Department must notify employees who have no federal income tax withheld that they may be able to claim a tax refund because of the EIC.

  • Disaster Recovery Planning
    It is important to examine the critical function at each stage of the payroll process and the significance of a breakdown at that juncture in processing the payroll. It may be possible that some critical functions, though essential for normal processing, may be able to be sidestepped during a disaster. This could include payroll reconciliations and Form W-4 changes

    A disaster recovery plan (DRP) also must include hard physical considerations as well as theoretical what ifs. If the plan calls for the Payroll Department to be moved to a different location or city, then the office space, computers, backup files, phone lines, phone equipment, and Internet access must be set up when the plan is approved and not just listed as the plan without actually having a physical place ready. It must be a site that is up and running and ready to go with just a few hours notice. The location information and such items as access codes should be included in the plan as well.


Find Other Payroll Training Courses

Let HRTrainingCenter.com keep your payroll department compliant and functional with our payroll training courses. To find other classroom, webinar, and online payroll training classes, simply select "Payroll" from the "Professional Development" section of the search box below.

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