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. The following states have deadlines that are different from IRS rules.

Statute of Limitations by State

Several state tax authorities share the same limit as the IRS, but differ in the details.

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

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 October 15 to file and you do so on August 1, the time allowed for an audit begins on August 1, not October 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 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.  

Montana

Montana usually allows itself three 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 from December 31 of the year in which the return was filed to assess taxes. It can be changed to up 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. 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.

The flip side is that it's only three years in Iowa—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. 

And in some states, there's no statute of limitations for collection at all, such as Rhode Island.

These deadlines 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 court case Beeler v. Commissioner, Mr. Beeler was held liable for payroll taxes that were determined to have been due 30 years ago. So if you never filed a return for a tax year, keep those tax records on hand, and file those taxes, the sooner the better.

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 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 tax situation. The information contained in this article is not intended as tax advice, and it is not a substitute for tax advice.

Article Sources

  1. IRS. "25.6.1 Statute of Limitations Processes and Procedures." Accessed June 1, 2020.

  2. American Bar Association. "IRS Can Audit for Three Years, Six, or Forever: Here’s How to Tell." Accessed June 1, 2020.

  3. Arizona State Legislature. "42-1104. Statute of Limitation; Exceptions." Accessed June 1, 2020.

  4. State of California Franchise Tax Board. "FTB 989 Publication: Understanding California Taxes." Accessed June 1, 2020.

  5. Colorado General Assembly. "Colorado Revised Statutes 2017: Title 39: Taxation." Accessed June 1, 2020.

  6. Kentucky Department of Revenue. "2010 Kentucky Individual Income Tax Instructions for Forms 740 and 740-EZ," Page 6. Accessed June 1, 2020.

  7. Michigan.gov. "Revenue Act: Audits and the Statute of Limitations." Accessed June 1, 2020.

  8. Ohio Laws and Rules. "5739.16 Four-Year Limitation for Assessments - Exceptions." Accessed June 1, 2020.

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

  10. Kansas State Legislature. " 79-3230. Periods of Limitation; Extension Agreements; Notice of Agreement With Internal Revenue Service." Accessed June 1, 2020.

  11. New Mexico Legislature. "HB 299," Page 6. Accessed June 1, 2020.

  12. Louisiana State Legislature. "RS 47:1580." Accessed June 1, 2020.

  13. Minnesota Department of Revenue. "Statute of Limitations." Accessed June 1, 2020.

  14. Montana Department of Revenue. "Individual Tax Records." Accessed June 1, 2020.

  15. Oregon State Legislature. "Chapter 314 — Taxes Imposed Upon or Measured by Net Income." Accessed June 1, 2020.

  16. 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 June 1, 2020.

  17. Illinois Department of Revenue. "Collection Process." Accessed June 1, 2020.

  18. California Legislative Information. "California Code, Revenue and Taxation Code - RTC § 19255." Accessed June 1, 2020.

  19. Missouri Revisor of Statutes. "Missouri Revised Statutes - § 143.902." Accessed June 1, 2020.

  20. Iowa Legislature. "Iowa Administrative Code: 701—38.2 (422) Statute of Limitations." Accessed June 1, 2020.

  21. Nebraska Legislature. "Nebraska Revised Statute 77-2786." Accessed June 1, 2020.

  22. Utah State Legislature. "Utah Code 59-1-1410." Accessed June 1, 2020.

  23. State of Rhode Island General Assembly. "§ 44-30-87. Limitations on Credit or Refund." Accessed June 1, 2020.