How Long Should You Keep State Tax Records?

Statute of Limitations for Tax Audits by State

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Taxpayers should keep their tax returns, as well as 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. That's the deadline for the IRS, although it can extend this time period to six years under some circumstances, such as if the income you report is more than 25 percent off from what it actually was.

Most states follow this same three-year rule of thumb, but some have longer statutes of limitations. The following states have deadlines that are different from IRS rules.

Statute of Limitations by State

Arizona, California, Colorado, Kentucky, Michigan, Ohio, and Wisconsin

These 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.

But an exception can exist if you request an extension of time to file your federal tax return. For example, the Colorado statute of limitations begins on the date you actually file your federal return. If the IRS gives you until Oct. 15 to file and you do so on Aug. 1, the time allowed for an audit begins on Aug. 1, not Oct. 15.

Kansas

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

  • The date the original return is filed
  • The date the original return is due, or
  • 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

These states give themselves three years to audit returns and assess additional taxes due. This time period begins on Dec. 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.  

Montana

Montana allows itself five years after the date the 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 early, the limitations period will end at that time.

Tennessee

This state normally has three years to assess taxes, but that can be extended to three and a half years if you've filed a claim for a refund. It can be changed to five years if the IRS has changed your federal return.

How Long Do States Have to Collect Taxes Due?

Keep in mind that 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.

The statute of limitations for the federal government to collect tax debts is 10 years. 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, and it's also 20 years for the state to impose a tax lien in Missouri.

The flip side is that it's only three years in Iowa—but only if you filed a tax return. Otherwise, it's 10 years. 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. In this case, the statute extends to 10 years and can be renewed when the initial 10 years expires.

And in some states, there's no statute of limitations for collection at all. These include Arkansas, Connecticut, Ohio, Oregon, Pennsylvania, Rhode Island, and Wisconsin.

Your Actions Can Affect the Statute of Limitations

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

For example, if you have amended your federal return or your federal return has been adjusted by the IRS, the statute of limitations for your state tax return might also be restarted. 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.

Also, there is usually no statute of limitations for failure to file a return. If you haven't filed one, the clock doesn't begin ticking. So you might want to keep the first two pages of all your tax returns as proof that you did in fact file just to be on the safe side.

Note: Tax laws can change periodically. Always consult with a tax professional for the most up-to-date advice if you're concerned about your personal tax situation. The information contained in this article is not intended as tax advice and it is not a substitute for tax advice.