Florida Contractor Practice Exam

How long should records of employment taxes be kept for IRS review?

1. 3 years

2. 4 years

3. 7 years

4. They do not need to be kept

The correct answer is: 4 years

The correct duration for retaining records of employment taxes for IRS review is four years. This timeframe is established by the IRS, which requires that employers keep employment tax records for at least four years after the date that the tax is due or paid, whichever is later. This timeline ensures that employers have adequate documentation available in case of an audit or review by the IRS. The four-year retention period is particularly important as it allows the IRS to verify compliance with tax laws during that timeframe. It includes records related to income tax withholding, social security, and Medicare taxes. Keeping these records in good order is crucial for accurate tax reporting and to safeguard against potential penalties for non-compliance. In this instance, while other options specify different durations or indicate unnecessary retention, the four-year period aligns with IRS guidelines and supports taxpayers in maintaining proper documentation practices. Maintaining records beyond this period is not mandated by the IRS unless they pertain to specific issues that could warrant further scrutiny.