It serves taxpayers well to keep copies of all relevant documents for several years after they were filed in case of an audit. However, tax law also includes a statute of limitations—a time limit after which the government can no longer investigate your filing. This varies between the national and state level, and on a state-by-state basis. The following guide looks at Texas, specifically.

What Is the Statute of Limitations for Taxes in Texas?

Texas tax law decrees that state taxes can no longer be assessed if four years have passed. The state has up to three years to file a suit to collect taxes based on the date a tax lien was last recorded, or when a tax became due and payable—whichever came later. Beyond this period, the lien expires and the tax—whether it be related to property, sales, or unemployment—becomes uncollectible.

Keep in mind that the federal tax law provides a different statute of limitations for tax collection. The IRS can collect federal taxes no more than ten years after their assessment; the same applies to the expiration of federal tax liens. This period starts on the date of the IRS tax assessment, not on the day a tax lien is filed. If you need help asserting your taxpayer rights or avoiding trouble with the IRS, consider seeking reliable legal advice.

How Can the Statute of Limitations Be Suspended or Extended?

The statute of limitations for tax assessment and collection may be suspended if there is a pending bankruptcy case, the tax payment has been made under protest, or a lawsuit has been filed to determine the amount of your tax liabilities.

If you have filed for bankruptcy protection, the IRS cannot assess your tax debt during the automatic stay period. The statute of limitations will be suspended during this time by an additional 60 days. A suspension also takes effect during proceedings where the taxpayer challenges the summoning of records from a third party. 

Knowing your state’s statute of limitations in regards to taxes can help you avoid an audit. Trust Corey C Davis, CPA, Attorney at Law in Kerrville, TX, for expert financial and legal advice should this matter arise. For more than a decade, Davis and his team have been providing clients with personalized and expert legal services on tax law, tax planning and preparation, and bookkeeping. Call their law firm today at (830) 257-8800 to schedule an appointment. Visit their website to get in touch with them online.