We had a restaurant that was using a manual method of taking orders and completing transactions. We would collect the written receipt, register tape of the calculations and the signed credit card receipt that was signed. Because these receipts are used in calculating Payroll for servers I am confused on how long should a restaurant keep (store) signed credit card (merchant copy) receipts? BOE says 3 years, IRS says 3 years, State of CA says 4 but in some articles I have read 5-7 years. What do you recommend?
– Corina, Financial, Pierside, Santa Maria, California
As always with questions like these, the best answer is the longest one to cover your bases. You don’t want to be compliant with one agency only to be hit with a fine or audit from another!
Your numbers are accurate for the most part but of course there are other groups who would want to see these numbers for even longer.
Deborah Schwartz, a Beverly Hills-based tax accountant says, “Generally the rule of thumb in California is four years because that is how long the Franchise Tax Board (FTB) can go back to audit your income tax returns. Board of Equalization (BOE), IRS and Employment Development Department (EDD) would generally go back three years. The reason you may see in some articles longer periods of up to 8 years are in special cases of EDD audits. However, they have audited back as far as 8 years when the employer has paid "employees" as 1099 subcontractors and the state feels it is an incorrect classification to avoid payroll taxes.”
Of course, rules vary by state, so check with your accountant, attorney and restaurant association to be sure you are following best practices.
Finally, a good accounting program and/or POS system will make this easier for you. More on record-keeping for restaurants here.