State Back Taxes and the Statute Of Limitations

BJ Lynch
Expert Contributor
Last Updated:
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  • Keep all records related to your tax returns for the amount of time the Internal Revenue Service (IRS) or your respective state has to perform an audit.
  • Staying current on your taxes by filing all tax returns and paying all taxes owed is the best course of action to avoid adverse tax issues.
  • When in doubt about decisions involving your taxes, seek help by using Solvable’s services.

Wrapping your head around taxes can be a difficult task. Here at Solvable, we strive to provide you with services to help you gain a better understanding of how taxes work. Not only do we help you get a grasp on what taxes are, but offer an unparalleled approach for connecting you with tax professionals.

The simple definition of a statute of limitations is “a law that limits the amount of time, after a transgression, in which legal action can be taken.” Both federal and state governments have legislation dedicated to the statute of limitations regarding taxes. The purpose of this article is to give a more in-depth look at state back taxes in regards to any given state’s statute of limitations. The knowledge you gain about taxes will enable you to have a more comprehensive understanding of them and will allow you to make confident decisions based on that knowledge.

State Back Taxes

Back taxes is no respecter of persons. Even the most straight-forward and honest person can find themselves knee deep in tax issues. State back taxes can become a big problem in just a small amount of time. You could be facing back taxes to your state for:

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  • Not filing tax returns
  • Not paying back taxes owed by the date due
  • Falling behind on payments (in an approved payment plan)

State back taxes are typically concerning local income taxes, property taxes, or both. Your state can take actions such as placing tax liens on your assets which can put your assets at risk. Assets that can be affected are:

State Back Taxes and the Statute Of Limitations

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  • Your business and all related property
  • Your house
  • Your vehicles
  • Your bank accounts
  • Your property

These liens could have an adverse influence on your credit report and credit score. The effects on your credit could last up to 10 years and cripple your ability to obtain business or personal loans such as:

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  • A mortgage on a new home
  • Student loans
  • Financing a new or used vehicle
  • Business loans

Once you have paid all the back taxes in full or can meet certain conditions and have all the relevant documentation, you can take steps to have state tax liens removed from your credit report. We recommend connecting with a tax specialist using Solvable’s services to help you with this type of process.

The obvious way to avoid actions against you concerning back taxes is to stay current on your taxes. Though this is the goal of all taxpayers, life can sometimes happen, and you can find yourself in less than favorable circumstances. Options that are available to you in such a situation are:

  • Seeking out tax professionals to aid you in resolving your tax issues.
  • Collecting all the information regarding your situation
  • Devising a plan to resolve your tax problems and executing that plan.
    • This plan could involve an approved payment plan, filing bankruptcy, or applying for an offer in compromise. All of these have individual qualifiers.

Maintaining excellent records for taxes is always a good idea. This will help you if there should ever be any discrepancies with the IRS or your state revenue service.

Statute Of Limitations

Each state can vary in how they handle the statute of limitations for assessing taxes. The majority of states adopt the same rules that the IRS follows, three years, but that can be increased to six years depending on the circumstances. Some states have a longer statute of limitations regarding the assessment of taxes. These states are as follows:

  • Kentucky, Arizona, Ohio, California, Michigan, Colorado, and Wisconsin follow these rules:
    • Four years from when a tax return is filed or was required to be filed. They use the date that is the latter of the two.
    • Exceptions can apply
  • Kansas follows these rules:
    • Three dates apply to taxes being assessed.
      • The original tax return filing date
      • The date when the original tax return was required to be filed
      • The date any tax due on the tax return was paid
    • Assessment of taxes is where a tax authority can review or audit a tax return to include extra taxes that may be due as a result of mistakes being revealed.
  • New Mexico and Louisiana follow these rules:
    • Three years is the standard timeframe.
    • The statute of limitations begins on December 31 on the year in which the tax was due.
  • Minnesota follows these rules:
    • Three and a half years from when a tax return is filed or when it was due to be filed. They use the latter of the two dates.
  • Montana follows these rules:
    • Five years from when a tax return is filed or when it was due to be filed. They use the latter of the two dates.
  • Oregon follows these rules:
    • Three years from when a tax return is filed, and it’s not contingent on any other date.
  • Tennessee follows these rules:
    • Assessment of taxes up to three years
    • Can extend to three and a half years if you filed taxes for a refund.
    • If the IRS alters your federal tax return, it can extend to five years.

The statute of limitations also applies to how long states can collect taxes that are due. This also changes with each state. The IRS statute of limitations allows for ten years in which the IRS can collect back taxes. A few states follow the IRS standards while others have more or less time to collect.

When dealing with state back taxes and the state statute of limitations, being well informed can make all the difference. Strategize a plan of action to help you resolve back taxes as quickly and painlessly as possible. The soundest course of action is to keep your taxes in check at all times. Let Solvable help you as you endeavor to maintain good standing when it comes to your taxes.

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BJ Lynch
Expert Contributor
Last Updated: