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Run the Payroll Fee Auditor →Blog · Payroll Management · Tech
Technology & SaaS Companies: Payroll Recordkeeping Requirements (2026)
Payroll recordkeeping for technology companies starts at the federal baseline, three years for payroll records and two for the time records behind them, then adds what reaches this industry: IRS Publication 15-B (2026), Employee Stock Options and IRS, Qualified small business payroll tax credit for increasing research activities. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Records specific to technology companies
When an employee exercises a nonstatutory stock option, the employer must report the excess of the stock's fair market value over the amount paid on Form W-2 in boxes 1, 3 (up to the social security wage base), and 5, and in box 12 using code V. Income from exercising an incentive stock option or an employee stock purchase plan option is not wages for social security, Medicare, or FUTA tax.
A qualified small business claiming the research payroll tax credit must complete Form 8974 and attach it to its employment tax return each quarter it claims the credit. Any credit in excess of the employer share of social security and Medicare tax on that return carries over to the next period's return.
The federal baseline every employer keeps
29 CFR 516 requires payroll records for three years and the records they were computed from, time cards, schedules and piece or commission records, for two years. Employment tax records stay four years after the return they support. Forms I-9 stay three years from hire or one year from separation, whichever is later. For technology companies the practical rule is that the pay codes for equity compensation handling and remote employee multi-state tax produce records of their own, and an audit reads those, not the summary.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- When an employee exercises a nonstatutory stock option, the employer must report the excess of the stock's fair market value over the amount paid on Form W-2 in boxes 1, 3 (up to the social security wage base), and 5, and in box 12 using code V. Income from exercising an incentive stock option or an employee stock purchase plan option is not wages for social security, Medicare, or FUTA tax. [IRS Publication 15-B (2026), Employee Stock Options]
- A qualified small business claiming the research payroll tax credit must complete Form 8974 and attach it to its employment tax return each quarter it claims the credit. Any credit in excess of the employer share of social security and Medicare tax on that return carries over to the next period's return. [IRS, Qualified small business payroll tax credit for increasing research activities]
Read the full guide to how to prepare for a payroll audit, and the rest of the technology company payroll library.
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Frequently Asked Questions
Technology company records: IRS Publication 15-B (2026), Employee Stock Options
When an employee exercises a nonstatutory stock option, the employer must report the excess of the stock's fair market value over the amount paid on Form W-2 in boxes 1, 3 (up to the social security wage base), and 5, and in box 12 using code V. Income from exercising an incentive stock option or an employee stock purchase plan option is not wages for social security, Medicare, or FUTA tax.
Technology company records: IRS, Qualified small business payroll tax credit for increasing research activities
A qualified small business claiming the research payroll tax credit must complete Form 8974 and attach it to its employment tax return each quarter it claims the credit. Any credit in excess of the employer share of social security and Medicare tax on that return carries over to the next period's return.
How long does a technology company keep payroll records?
Three years for payroll records and two for supporting time records under the FLSA, four years for employment tax records under the IRS rule, and longer where an industry rule cited above says so.
What does managed payroll cost for a technology company?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Equity compensation handling, remote employee multi-state tax and contractor classification are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Technology & SaaS Companies. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Wage and Hour Division
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