As we approach year-end many readers ask about recordkeeping requirements. The two questions that most employers often ask are:

1. What kinds of records should I keep?
2. How long should I keep the records?

What kinds of records should I keep?
You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes. For more information, click here.

How long should I keep records?
The length of time you should keep a document depends on the action, expense, or event the document records. You must keep your records as long as they may be needed to prove the income or deductions on a tax return. For more information, click here.

Employment Tax Records
Among the various items that must be kept, are employment tax records. Keep all records of employment taxes for at least four years. These should be available for IRS review. Records should include:

• Your employer identification number.
• Amounts and dates of all wage, annuity, and pension payments.
• Amounts of tips reported.
• The fair market value of in-kind wages paid.
• Names, addresses, social security numbers, and occupations of employees and recipients.
• Any employee copies of Form W-2 that were returned to you as undeliverable.
• Dates of employment.
• Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third-party payers made to them.
• Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4S, and W-4V).
• Dates and amounts of tax deposits you made.
• Copies of returns filed.
• Records of allocated tips.
• Records of fringe benefits provided, including substantiation.

For Additional Information, see:

• DOL’s FirstStep Recordkeeping, Reporting and Notices Advisor
• www.irs.gov/businesses
• Business With Employees
• Operating a Business
• Recordkeeping

Also, be sure to refer to the Human Resources section in HR & Benefits Essentials for more information.

Pension Plan limitations and other COLA adjustments for 2009 
IRS Announces Pension Plan Limitations for 2009
IR-2008-118, Oct. 16, 2008 — The IRS announced cost of living adjustments applicable to dollar limitations for pension plans and other items for tax year 2009.

2009 Inflation Adjustments Widen Tax Brackets and Expand Tax Benefits
IR-2008-117, Oct. 16, 2008 — The value of personal dependency exemptions, standard deductions and other tax items have been adjusted for inflation for tax year 2009.

IRS Announces 2009 Standard Mileage Rates
IR-2008-131, Nov. 24, 2008 — The IRS issued the 2009 optional standard mileage rates used for the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

IRS Issues Fall 2008 Statistics of Income Bulletin
IR-2008-132, Nov. 24, 2008 — IRS statistics for tax year 2006 are now available providing tax related details about sole proprietorships, partnerships, certain foreign corporations, tax exempt organizations and personal wealth.

Independent Contractor (Self-Employed) Versus Employee
It is very important that employers correctly determine whether the individuals providing services are employees or independent contractors. Generally, an employer must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee.  Businesses do not generally have to withhold or pay any taxes on payments to independent contractors.

Before an employer can determine how to treat payments made for services, it is important to first fully analyze the business relationship that exists between the business and the person performing the services. Please click here to obtain vitally important information to help correctly determine the differences between an independent contractor and an employee.

Do you have specific guidelines for an effective employee disciplinary process? 

There are specific guidelines and steps that should be taken to help prevent future issues and as a documented record of an employee’s disciplinary problem. The following are some guidelines.

• Initial Notification: Inform the employee that the job performance or conduct on the job does not meet company's standards. This initial communication is usually delivered verbally in a meeting between the manager and employee.
• First Written Warning Notice: If the employee’s job performance fails to improve, another meeting should be held with the employee. A written memo that spells out job performance areas that need improvement should be provided to the employee. It's important at this stage in the process that the employee be made aware of how his or her behavior is affecting the business. The manager should try to work with the employee to come up with a plan of action that gives the employee an opportunity to improve.
• Second Written Warning Notice: This is a second written notice from a senior manager that informs the employee that if the job performance or workplace conduct problems continue, the employee will be subject to disciplinary action up to and including termination.
• Corrective action: Document specific steps taken to help the employee improve performance and add to personnel file.
• Termination: Termination is, of course, the final step to be taken when all other corrective or disciplinary actions have failed to solve the problem.
• If termination is warranted, don’t forget COBRA Termination Notice and HIPAA requirements.