Utah Contractor Practice Exam

What is the required record retention period for FUTA and other federal taxes by an employer?

1. 2 years

2. 4 years

3. 6 years

4. 10 years

The correct answer is: 4 years

Employers are required to retain records relating to the Federal Unemployment Tax Act (FUTA) and other federal taxes for a period of four years from the date the tax becomes due or is paid, whichever is later. This retention period ensures that employers have adequate documentation available if the Internal Revenue Service (IRS) conducts an audit or inquiry regarding employment taxes. Maintaining these records helps in verifying compliance with federal tax laws and can assist employers in resolving any discrepancies that may arise. The four-year requirement reflects an effort to balance the need for record-keeping with the practical aspects of business operations, allowing employers to manage their records effectively while still being prepared for potential audits.