Sticking with a Compliance Policy
Businesses should contemplate W-4 file shredding on a regular basis. Tax documents take up a lot of physical space in employer offices. And HR or payroll departments most likely don’t want to keep tax- or employee-related paperwork for eternity. As with the destruction of any tax documents, you can’t just wipe the files clean annually or clear out records when a worker leaves. There are federal, state, and industry guidelines that govern how long records such as W-4 forms must be kept.
General W-4 Retention Guidelines
General federal guidelines for W-4 retention is that the employer should keep all forms for up to four years after relevant taxes were last due or paid. Calculate the four years from the latest relevant date. For example, if the employee left the company in January 2006, the employer may have made the last employer withholdings deposit in February 2006. Since the employer likely claimed financials related to the employee on 2006 income tax forms, the company should not destroy W-4 — or any tax records — related to the employee until the end of 2010.
Consistent Document Retention Policies
Many companies extend document retention policies past general minimums for utmost protection. When creating document retention policies, make sure you consider state, local, and industry-specific regulations as well. It’s important to be consistent with document retention policies. Treat all W-4 records the same and train employees on policies to avoid errors or problems.
W-4 File Shredding
Document retention policies should cover W-4 file shredding once timelines for retention have passed. Because W-4 records contain social security numbers and other personally identifiable information, they cannot simply be thrown away. Integrate W-4 forms into your office’s confidential and compliant shredding service policy. Better yet, institute an All-Shred policy to keep things simple and efficient.
How do you handle W-4 file shredding?