I recently learned that a taxpayer received a letter from the state saying that he owed income taxes from 23 years ago. Now he has to pay taxes for ALL all those years plus penalties and interest. Whaaaat?
There are statute of limitations of how long the Internal Revenue Service (IRS) and the Illinois Department of Revenue (IDOR) can audit taxes. There are also limitations on how long they can collect that money.
Federal Income Tax Documents
I was always told to save my federal and state income tax documents for up to seven years. This article on The Balance, IRS Statute of Limitations, provides more details this topic.
State Income Tax Documents
I could not locate specific details about the statutes of limitations on Illinois state audits on the IDOR website. However, this article gives an idea about how long you should save your state tax documents. Also, keep the following statement as you’re tempted to throw away those tax papers that are taking up valuable space:
Keep in mind, 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 according to your initial tax return.
Keep Your Income Tax Documents
Armed with this knowledge, I encourage you to keep their tax documents for over 10 years. Even when the IRS’s statute of limitations have passed, the state could still come for you. I know that storing papers is not ideal, but consider scanning the documents and storing them on a flash drive or securely in the cloud (DropBox, Google Drive, etc) so you can still access them immediately.
What About You?
Have you ever been audited by the IRS or state revenue department? Were you able to access the documents they requested? Let us know in the comment box below.