How Long Should You Keep State Tax Records?

Statute of Limitations for Tax Audits by State

Stacks and racks of tax files and folders
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Taxpayers should keep their tax returns, and supporting documents related to their tax returns, for as long as their state tax agency and the Internal Revenue Service have to perform an audit. These deadlines are known as statutes of limitations.

For most people, this means keeping your tax records for at least three years from the date you file your tax return or the due date of the tax return, whichever is later. That's the most common deadline for the IRS, although it can extend this period to six years under some circumstances, such as if the income you report is more than 25% off from what it actually was.

Most states follow this same three-year rule of thumb, but some have longer statutes of limitations. Here's how some states differ from IRS rules.

Statute of Limitations by State

Several state tax authorities share similar statutes of limitations as the IRS, but with differences in the details.

Kansas

Taxes must be assessed within three years after the latest of these three dates in Kansas.

  • The date the original return is filed
  • The date the original return is due
  • The date the tax due on the return is paid

An assessment means that the tax authority can review or audit the return and add additional taxes due when and if mistakes are uncovered. Taxes can also be assessed in Kansas up to one year after an amended return is filed if it's filed later than the dates above.

Louisiana and New Mexico

Like the IRS, these states give themselves three years to audit returns and assess additional taxes due. However, unlike the IRS, this period begins on December 31 of the year for which the tax is due. 

Minnesota

Minnesota's statute of limitations is three and a half years from the date a return is filed or the date the return is due, whichever is later.  

Oregon

Oregon's statute is three years after the return is filed, regardless of whether it's filed on or after the due date. So if the return is filed earlier than April 15, the limitations period will end earlier, as well.

Tennessee

This state normally has three years from December 31 of the year in which the return was filed to assess taxes. That limitation can be extended by up to two years if there are certain revisions made to your taxes after the initial filing.

States With a Four-Year Statute of Limitations

The following states give themselves four years after a return is filed or required to be filed, whichever date is later (if your return is due April 15, but you file in February, the clock begins ticking on April 15):

  • Arizona
  • California
  • Colorado
  • Kentucky
  • Michigan
  • Ohio
  • Wisconsin

These states allow for certain exceptions. For example, an exception can exist if you request an extension of time to file your federal tax return. Other exceptions apply to certain types of income and tax liabilities.

How Long Do States Have to Collect Taxes Due?

Keep in mind, these deadlines relate to the amount of time a state has to get around to auditing a tax return and assessing any additional taxes due. They generally have longer—sometimes much longer—to collect any tax that you owe according to your initial tax return.

The statute of limitations for the federal government to collect tax debts is 10 years. This deadline applies to tax returns that were filed where taxes were due, but where the taxes have not yet been paid. Several states mirror this deadline, but some have much longer, and some have less time to initiate collection actions. It's 20 years in California and Illinois.  It's also 20 years for the state to impose a tax lien in Missouri.

Some states have shorter statutes of limitations. In Iowa, it's three years—but only if you filed a tax return. It's also only three years in Utah, as well as in Nebraska (unless a Notice of State Tax Lien is recorded with the government). 

Your Actions Can Affect the Statute of Limitations

The statute of limitations might not cover every situation, and every state's statute has its caveats, even those that generally follow the IRS rules. 

For example, if you have amended your federal return or the IRS adjusted your return, the statute of limitations for your state tax return might also restart. Signing any type of payment agreement or offer in compromise with the state or the federal government can also reset the state statute of limitations. 

The statute of limitations does not apply to fraud or tax evasion. Federal law also extends the statutes under these circumstances. There is no statute of limitations for civil tax fraud.

You Must File Tax Returns to Start the Clock

The deadlines discussed in this piece apply to tax returns that were filed but were never paid. But what happens if no tax return was ever filed? In this case, the IRS can successfully argue that, because no tax return was filed, the statute of limitations was never started (and therefore never ended), and there is no time limit for the IRS to take action on that year. In the court case Beeler v. Commissioner, a man was held liable for payroll taxes that were determined to have been due 30 years ago.

If you missed a return for a tax year, keep those tax records on hand, and file those taxes—the sooner the better.

The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.

Article Sources

  1. Internal Revenue Service. "25.6.1 Statute of Limitations Processes and Procedures." Accessed Oct. 26, 2020.

  2. Kansas State Legislature. " 79-3230. Periods of Limitation; Extension Agreements; Notice of Agreement With Internal Revenue Service." Accessed Oct. 26, 2020.

  3. New Mexico Legislature. "HB 299," Page 6. Accessed Oct. 26, 2020.

  4. Louisiana State Legislature. "RS 47:1580." Accessed Oct. 26, 2020.

  5. Minnesota Department of Revenue. "Statute of Limitations." Accessed Oct. 26, 2020.

  6. Oregon State Legislature. "Chapter 314 — Taxes Imposed Upon or Measured by Net Income." Accessed Oct. 26, 2020.

  7. Justia. "2010 Tennessee Code Title 67 - Taxes and Licenses Chapter 1 - General Provisions Part 15 - Statute of Limitations 67-1-1501 - Limitation on Assessment and Collection of Taxes." Accessed Oct. 26, 2020.

  8. Arizona State Legislature. "42-1104. Statute of Limitation; Exceptions." Accessed Oct. 26, 2020.

  9. State of California Franchise Tax Board. "FTB 989 Publication: Understanding California Taxes." Accessed Oct. 26, 2020.

  10. Colorado General Assembly. "Colorado Revised Statutes 2017: Title 39: Taxation," Page 273. Accessed Oct. 26, 2020.

  11. Kentucky Department of Revenue. "2010 Kentucky Individual Income Tax Instructions for Forms 740 and 740-EZ," Page 6. Accessed Oct. 26, 2020.

  12. State of Michigan Department of Treasury. "Revenue Act: Audits and the Statute of Limitations," Page 3. Accessed Oct. 26, 2020.

  13. Ohio Laws and Rules. "5739.16 Four-Year Limitation for Assessments - Exceptions." Accessed Oct. 26, 2020.

  14. State of Wisconsin Department of Revenue. "General Information." Accessed June 1, 2020.

  15. Internal Revenue Service. "5.1.19 Collection Statute Expiration." Accessed Oct. 26, 2020.

  16. Illinois Department of Revenue. "Collection Process." Accessed Oct. 26, 2020.

  17. California Legislative Information. "California Code, Revenue and Taxation Code - RTC § 19255." Accessed Oct. 26, 2020.

  18. Missouri Revisor of Statutes. "Missouri Revised Statutes - § 143.902." Accessed Oct. 26, 2020.

  19. Iowa Legislature. "Iowa Administrative Code: 701—38.2 (422) Statute of Limitations." Accessed Oct. 26, 2020.

  20. Nebraska Legislature. "Nebraska Revised Statute 77-2786." Accessed Oct. 26, 2020.

  21. Utah State Legislature. "Utah Code 59-1-1410." Accessed Oct. 26, 2020.

  22. American Bar Association. "IRS Can Audit for Three Years, Six, or Forever: Here’s How to Tell." Accessed Oct. 26, 2020.