Non profit payroll: What records to keep?

With the various state and federal laws, rules pertaining to employee records can be confusing. Non profit payroll records and personnel records are no exception. So what employee records should you keep on file? If applicable, each employee’s personnel file should contain:

• job description


• job application & offer of employment


• IRS Form W-4


• acknowledgement of receipt of employee handbook signed by the employee


• periodic performance evaluations


• employee benefit forms


• awards for excellent performance


• warnings and disciplinary actions


• notes on attendance and tardiness

Nonprofit payroll records

Nonprofit payroll records and related documents must be retained for a minimum of three years under FLSA. Certain back-up documents (i.e. time cards) must be retained for just two years. However, many states have their own laws which can lengthen these time periods so we encourage you to check your local regulations.

Unlike personnel files, nonprofit payroll records do not need to be retained for the term of employment, but on a rolling basis beginning with the date they were created. However, since nonprofit payroll records may be helpful in defending an IRS audit, payroll records more than six years old may be relevant and it may be beneficial to retain them longer. Since this is a complex issue, we advise you to consult a tax adviser for any nonprofit payroll issues.