How Long Do Employers Have to Keep W-2s: Record Retention Rules for Businesses

Find out how long employers must keep W-2s and other tax records to stay compliant with IRS retention rules. Protect your business from penalties by organizing employment tax documents, payroll files, and historical returns for the recommended periods.

By Brad Nakase, Attorney

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Table of Contents

1. Introduction

2. Individual Taxpayers

3. Business Taxpayers

4. Conclusion

Introduction

You might be inclined to discard certain current and previous year tax data once you have collected your tax-related documents and submitted the necessary returns. In the unlikely scenario that the IRS or another taxation authority requests that you produce pertinent tax documentation in the context of an audit, you ought to be mindful of the guidelines for keeping that data.

People often ask one basic thing: “How long do employers have to keep W-2s?” It is an important detail in the recordkeeping process.

Individual Taxpayers

Maintain for at least three years: The following documents are frequently used to support a taxpayer’s income and expenses:

Forms W-2 and 1099
Bank and investment statements on Form (s) K-1
Cancelled checks or other evidence that deductible expenses have been paid

The previously mentioned tax records must be retained for at least three years after the date you file the tax return (or when it is due, if later).

Six years could be required: The IRS has a six-year window in which to start an investigation on a return in which income was significantly underestimated, but no fraud was found. To better safeguard yourself in the case of an audit, keep all of these records for a minimum of six years.

Investment Records: In a similar vein, after you sell an investment, you should save the sales records. Documentation establishing an investment’s profit or loss should be retained for the same amount of time as other tax records supporting the tax return on which the sale is reported.

Previous Years’ Tax Returns: Keeping one or more everlasting files containing significant legal and private papers, including tax-related ones, is a smart idea. In particular, you should generally keep copies of your state and federal income tax returns (as well as any tax payments) for as long as possible.

For example, the IRS (or other taxing body) may assert that you never submitted a return for a specific year. If such happens, the IRS may impose taxes and penalties on the relevant return. To support your claim that you submitted the return, you must have a copy of it.

Business Taxpayers

The question circles back every year: “How long do employers have to keep W-2s?” Businesses face stricter rules and higher risks. Maintaining correct and current corporate records is an employer’s duty. Companies, particularly small enterprises, must be ready for the prospect of an audit, just like individual taxpayers.

Employment Tax Documents: Employment tax documents must be kept for a minimum of four years following the date when the tax is paid or the date the return of taxes for the relevant period is due. Noncompliance might result in severe sanctions. The following details ought to be included in these records:

Identification number for employers (EIN);
Dates and amounts of every pension, annuity, and salary payment;
Amounts of reported tips;
The in-kind compensation’s fair market value.
Names, address information, Social Security identities, and jobs held by recipients and employees;
Forms W-2 copies from employees that got returned as not delivered;
Employment dates;
The amount & weekly rate of compensation made to staff members and recipients by the company or outside payers during periods when they were absent due to illness or accident;
Copies of income-tax withholding certificates (Form W-4) for recipients and workers;
Tax deposit dates and amounts;
Copies of submitted returns;
Documentation for the recommendations that were given, and
Documentation for the fringe benefits that were given, together with the necessary proof.

Pass-through Corporate Entities: You should keep a copy of the yearly Form K-1 for the duration, as you have an interest in a subchapter S company, limited partnership, LLC, or LLP, plus an extra four years. Additionally, retain any documents associated with the sale or other transfer of your stake for a minimum of four years following the disposition.

Fringe benefit documentation is provided together with the necessary supporting documentation.

Corporation Income Tax Returns: Keeping copies of every single corporate tax return for as long as possible is highly recommended.

Other company Records: In the event of a tax audit, you should also retain the following company records forever:

Board minutes
Business licenses
Bylaws
Patents/Trademarks
Contracts, mortgages, and leases
Stock transactions/registers
Shareholder records
Real estate purchases
Employee benefit plans (profit sharing/pension plans)
Leasehold improvements
Construction records
Fixed asset purchases
Yearly financial statements
Depreciation schedules

The following company documents have to be kept on file for 7 years or more:

Accounts Receivable/Payable
Loan payment timelines
Inventory records
Sales records
Expense records
Bank statements
Purchase orders
Loan records
Electronic payment details
Cancelled checks
Payroll records

Payroll and W-2 data fall under strict scrutiny here. How long do employers have to keep W-2s? It’s not just a number. It’s a compliance requirement tied to employment tax rules.

Conclusion

Keeping tax records isn’t just a rule; it’s protection. It’s applicable to both individuals and businesses. People keep asking: “How long do employers have to keep W-2s?” It’s because so many issues start with missing paperwork. Some papers look unimportant at the moment, but they matter years later. An audit, a missing form, a question you didn’t expect from the revenue department. That’s when these files suddenly become valuable. So keep them.

Keep them longer than you think you need to. Old returns, payroll data, W-2s, K-1s, all of it. It’s simpler than scrambling later. Recordkeeping just has to be consistent & steady. Over time, it saves you trouble, and sometimes, it saves you money too. And that’s really why the question: “How long do employers have to keep W-2s?” matters so much.

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How Long Do Employers Have to Keep W-2s: Record Retention Rules for Businesses

Introduction

Individual Taxpayers

Business Taxpayers

Conclusion

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