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, but the agency can extend this period to six years under some circumstances. This can happen 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.
- It’s recommended that you retain tax records and documents for at least as long as the IRS and your state have to audit you.
- You can be audited for up to six years by the IRS if the income you report on your return is more than 25% less than what you actually took in. State tax rules can vary by state.
- Most IRS audits must occur within three years, but six states give themselves four years. Louisiana gives itself three and a half years.
- Statutes of limitation can restart with your state if the IRS adjusts your federal return or if you file an amended return.
Statutes of Limitations by State
Several state tax authorities share statutes of limitations similar to that of the IRS but with differences in the details.
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. It can 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 any additional taxes that are due. This period begins on December 31 of the year for which the tax is due, unlike with the IRS.
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's statute of limitations is three years after the return is actually filed, regardless of whether it's filed on or after the due date. For example, if the return is filed earlier than April 15, the limitations period will end earlier as well.
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.
Keep those tax records on hand, and file those tax returns if you missed a return for a given tax year. The sooner, the better!
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.
The clock begins ticking on April 15 if your return is due April 15, even if you file in February.
These states allow for exceptions for certain types of income and tax liabilities. An exception can exist if you request an extension of time to file your federal tax return.
How Long 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 to collect any tax that you owe according to your initial tax return, sometimes much longer.
The statute of limitations for the federal government to collect tax debts is 10 years. This deadline applies to tax returns that were filed with taxes 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. California and Illinois have 20 years to initiate collections. It's also 20 years for the state to impose a tax lien in Missouri.
Some states have shorter statutes of limitations. It's 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.
What Affects the Statute of Limitations?
The statute of limitations might not cover every situation. Every state's statute has its caveats, even those that generally follow the IRS rules. For example, the statute of limitations for your state tax return might also restart if you've amended your federal return, or the IRS adjusted your return.
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
These deadlines apply to tax returns that were filed but the associated taxes were never paid. What happens if no tax return was ever filed? The IRS can successfully argue that the statute of limitations was never started in such a case. No return was filed to trigger it.
Frequently Asked Questions
What tax records should I keep?
Debt.org recommends retaining copies of all your filed tax returns, bank account registers and statements, receipts for tax-deductible expenses paid, home mortgage statements, brokerage statements, and retirement account records. Basically, you'll want to hold on to all documentation that relates to anything you reported on your tax return.
Are there any circumstances where I should save records indefinitely?
The IRS suggests that you retain records forever or at least until the matter is resolved if you fail to file a tax return for a given year or if you file a fraudulent return. Most states follow guidelines similar to those recommended by the IRS.