How long must an employer retain an employee's W-4 after the tax return due date?

An employer is required to retain an employee's W-4 form for four years after the tax return due date. This regulation is in place to ensure that employers have access to the necessary documentation in the event of an audit or any inquiry from the IRS regarding withholding allowances that the employee has claimed.

The four-year retention period aligns with the IRS statute of limitations for assessing additional tax owed, which is generally three years from the date a return is filed. However, since employees may change their withholding status frequently or submit new W-4 forms, retaining the documents for an additional year beyond the tax return due date provides employers assurance that they can verify the withholding decisions made.

Maintaining these records is essential for accurate payroll processing and maintaining compliance with tax regulations. It's always important for employers to have clear documentation to support their payroll practices and minimize risk in case of any discrepancies or issues raised by tax authorities.