As an outsider looking in, it’s easy to think that long-term recordkeeping is a governmental formality that primarily involves taxes and business dealings. A lot of other people know that payroll records and bookkeeping may come into play during contentious divorce proceedings in which one spousal will subpoena payroll records from the other spouse to prove and document income and assets.
More than just these common examples in which recordkeeping plays a role for several years, there are also less common criminal and civil proceedings in which accounting and payroll records may be subpoenaed. The recent Supreme Court nomination accusations and hearings created a vivid example of how payroll records might be requested even decades after the fact. In this case, the employment records of an employee at a Safeway in Potomac, MD might be used to determine the alleged timeline of an attempted sexual assault.
Bookkeeping Rules and Guidelines
Putting aside the politics and the seriousness of sexual assault, we thought we’d address this topic from an accounting and software background. First, what are your obligations as an accountant and employer? Generally speaking, businesses are required to maintain relevant accounting and payroll records for seven years; although in addition to federal requirements, there are also state-by-state requirements that may extend this time period even further.
We’re not a lawyer, so here’s the disclaimer that this isn’t legal advice, but it’s our understanding that, if issued a subpoena, you are generally required to produce the requested documents unless there are legitimate privacy concerns, proprietary information, or other legal basis. Crucially, for accountants, simple inconvenience in retrieving the documents is not enough reason for failing the request. If you do think there’s a legal basis or aren’t sure, talk to an attorney.
Digital Recordkeeping and Data Retrieval
For the older generation of accountants, a quarter century sounds like a long time to maintain payroll records. And understandably so, especially when doing so involved designating another office for archival storage space. You know, when filing cabinets were bought and sold in bulk. Nowadays, this type of bottleneck is no longer applicable. Typically, the proprietary data in such long-kept records can be preserved in the top-line numbers rather than individual personnel files.
Aside from the fact that it’s easier to just not delete the files and not have to think about, the question then becomes is there some value in protecting your employee’s privacy by not keeping records beyond when you’re legally required to do so. It’s also fair to consider whether governments will pass laws making the required length of recordkeeping indefinite in light of the fact that it doesn’t seem to cost businesses anything extra to maintain these records digitally.