Fundamental Payroll Audits and Record Retention Questions and Answers

Question 1

An employee was hired on March 1, 2023, and their employment was terminated on May 15, 2025. According to USCIS regulations for Form I-9, what is the earliest date the employer can legally destroy this employee's Form I-9?

Accepted Answer

May 15, 2026

Answer

The rule for Form I-9 retention is to keep the form for three years after the date of hire OR one year after the date of termination, whichever date is later. Three years from the hire date (March 1, 2023) is March 1, 2026. One year from the termination date (May 15, 2025) is May 15, 2026. The later of these two dates is May 15, 2026.

Question 2

According to the Internal Revenue Service (IRS), for how long must an employer keep employment tax records after the due date of the return or the date the tax is paid, whichever is later?

Accepted Answer

4 years

Answer

IRS regulations require employers to keep records related to employment taxes, such as Forms W-2, W-4, 941, and records of tax deposits, for a minimum of four years after the tax is due or paid, whichever is later.

Question 3

What is the primary purpose of conducting a proactive internal payroll audit?

Accepted Answer

To ensure compliance with regulations and identify process inefficiencies.

Answer

The main goal of an internal payroll audit is to proactively review payroll processes and records to ensure the company complies with all applicable laws and regulations, identify any errors or inefficiencies, and correct them before they become larger problems.

Question 4

Under the Fair Labor Standards Act (FLSA), which of the following payroll-related records must be preserved for at least two years, as opposed to the more common three-year requirement?

Accepted Answer

Time cards and wage rate tables.

Answer

While the FLSA requires most primary payroll records to be kept for three years, supplementary records on which wage computations are based, such as time cards, work schedules, and wage rate tables, are only required to be kept for two years.

Question 5

An employer must maintain records related to an employee's leave under the Family and Medical Leave Act (FMLA). What is the minimum retention period for these records?

Accepted Answer

3 years

Answer

The Department of Labor (DOL) requires employers covered by the FMLA to make, keep, and preserve records pertaining to their obligations under the Act for a period of at least three years.

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Practice Test

Fundamental Payroll Audits and Record Retention Questions and Answers