How Long Does Your State Have to Audit Your Tax Return?

Ebony Howard is a certified public accountant and a QuickBooks ProAdvisor tax expert. She has been in the accounting, audit, and tax profession for more than 13 years, working with individuals and a variety of companies in the health care, banking, and accounting industries.

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Two-panel Image shows a person completing tax forms and using a calculator and the second panel shows papers with a magnifying glass, a calendar, and the outline of some US. states. Text reads: How long should you keep your state tax records. You should keep your state tax records for as long as the IRS and your state tax agency have to perform an audit. For the majority of states, this means at least three years, which coincides with the IRS deadline. In some states such as Michigan, California, Kansas, etc. the statutes of limitations vary.

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.

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.

Key Takeaways

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.

Kansas

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

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

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 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.

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.

Note

Keep your tax records on hand, and file those tax returns if you missed a return for a given tax year—the sooner you file late returns, the better.

States With a 4-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 (FAQs)

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.

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  1. IRS. "25.6.1 Statute of Limitations Processes and Procedures."
  2. Kansas State Legislature. " 79-3230. Periods of Limitation; Extension Agreements; Notice of Agreement With Internal Revenue Service."
  3. New Mexico Legislature. "HB 299," Page 6.
  4. Louisiana State Legislature. "RS 47:1580."
  5. Minnesota Department of Revenue. "Statute of Limitations."
  6. Oregon State Legislature. "Chapter 314 — Taxes Imposed Upon or Measured by Net Income."
  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."
  8. Arizona State Legislature. "42-1104. Statute of Limitation; Exceptions."
  9. State of California Franchise Tax Board. "FTB 989 Publication: Understanding California Taxes."
  10. Colorado General Assembly. "Colorado Revised Statutes 2017: Title 39: Taxation," Page 273.
  11. Kentucky Department of Revenue. "2010 Kentucky Individual Income Tax Instructions for Forms 740 and 740-EZ," Page 6.
  12. State of Michigan Department of Treasury. "Revenue Act: Audits and the Statute of Limitations," Page 3.
  13. Ohio Laws and Rules. "5739.16 Four-Year Limitation for Assessments - Exceptions."
  14. IRS. "5.1.19 Collection Statute Expiration."
  15. Illinois Department of Revenue. "Collection Process."
  16. California Legislative Information. "California Code, Revenue and Taxation Code - RTC § 19255."
  17. Missouri Revisor of Statutes. "Missouri Revised Statutes - § 143.902."
  18. Iowa Legislature. "Iowa Administrative Code: 701—38.2 (422) Statute of Limitations."
  19. Nebraska Legislature. "Nebraska Revised Statute 77-2786."
  20. Utah State Legislature. "Utah Code 59-1-1410."
  21. Debt.org. "What to Expect During an IRS Audit and How to Prepare."
  22. IRS. "How Long Should I Keep Records?"
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