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How long to keep payroll records
Payroll retention depends on the type of record and the rule governing it. Build a schedule that identifies each record’s purpose, relevant starting date and any open audit or dispute before deleting files.
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General information, not legal or tax advice.
Apply the employment-tax retention baseline
The IRS requires employment-tax records for at least four years after the tax becomes due or is paid, whichever is later. EDD also requires payroll records for at least four years. Keep tax periods and payment dates with the archive so the retention calculation can be explained.
Sources: IRS - How long should I keep records?; EDD - California Employer's Guide DE 44 (Rev. 52 (4-26))
Retain evidence for claimed worker exemptions
EDD says businesses claiming they are not subject employers or that workers are exempt must retain service-provider payment records for at least eight years. Preserve agreements, payment detail and the reviewed classification support. Do not move those records into a shorter payroll archive solely because no wage form was issued.
Sources: EDD - California Employer's Guide DE 44 (Rev. 52 (4-26))
Distinguish wage records from calculation support
Federal guidance describes three years for payroll records and two years for underlying wage-computation records such as timecards and rate tables. California paid-sick-leave guidance separately requires earned and used leave records for three years. Review overlapping obligations before selecting an actual deletion date.
Sources: U.S. DOL WHD Fact Sheet #21 (Revised July 2008); DLSE - Paid Sick Leave FAQ
Keep public works and active matters identifiable
DIR expressly requires exempt small-project contractors to keep accurate certified payroll records for at least three years and provide them on request. For other projects, the cited manual points to applicable limitation periods. Have counsel review active disputes and contract obligations before treating a general retention schedule as permission to destroy records.
Sources: apply the employment-tax retention baseline
Organize the payroll archive
Tidwell helps organize payroll inputs, review records and support payroll reporting. We coordinate tax questions with your CPA and leave employment-law interpretation with your legal adviser.