North Carolina Building Contractor License Practice Exam

How long must all employment tax records be retained?

1. 2 years

2. 4 years

3. 6 years

4. 10 years

The correct answer is: 4 years

In North Carolina, as well as federally, employment tax records must be retained for four years after the date the tax becomes due or after the date the tax is paid, whichever is later. This retention period is important for several reasons, mainly to ensure compliance with regulations and to provide necessary documentation if there are any inquiries or audits by the IRS or state tax authorities. These records include payroll records, tax withheld, and payments made to the government. Keeping these records for four years allows contractors and employers to have adequate documentation for reference and to prepare for potential audits, ensuring they remain compliant with tax laws and regulations during that time frame. This compliance is critical in avoiding penalties or disputes regarding employment taxes.