If you find that you made an error on a prior year’s federal income tax return or you missed a deduction or credit and you paid too much tax, you generally have a certain amount of time to file an amended return to claim a refund. According to the IRS, this period of limitations is 3 years from the date you filed the original return or 2 years from the date you paid the tax, whichever is later. If you file your return before the due date, the 3-year period starts on the due date, which is generally April 15. If you had an extension to file, for example until October 15, but you filed earlier, for example on July 1, the 3-year period would start on July 1.
The IRS also generally has 3 years to go back and review your tax returns and potentially assess additional tax. But if the IRS reviews your return and finds that you understated your income and the understatement amounts to more than 25% of the income reported on your return, the period of limitations is extended to 6 years after you filed the return. And, if you did not file a return or the IRS determines that you filed a false or fraudulent return with the intent to evade tax, the IRS can bring action at any time, so there is no period of limitations.
For this reason, you should generally keep copies of your federal income tax returns and all supporting documentation for at least 3 years if you are confident you reported all your taxable income. You may need to keep certain records longer, such as records that support the basis of property for purposes of calculating depreciation or to determine the gain or loss when you sell or dispose of the property. These records should be kept as long as you own the property and for at least 3 years after you dispose of the property.
As explained in Publication 594, The IRS Collection Process, by law the IRS has 10 years to collect taxes, from the date your tax liability was assessed. So if the IRS reviews a prior year return and finds that you owe additional tax, the 10 years would start then and not when you originally filed the return.
The 10-year period for collection is temporarily suspended in certain cases, such as while the IRS is considering your request for an installment agreement or an offer in compromise, or if you have applied for innocent spouse relief. The collection period is also suspended while you are in a collection due process or you seek review in a tax court, and during the automatic stay period in a bankruptcy proceeding. The amount of suspension time is added to the time remaining in the 10-year period for collection.
It’s important to note that states may have different statutes of limitations for reviewing and assessing tax on state income tax returns and for collecting the tax. You should check with your state’s department of revenue or taxation for information.
Form 1040X – Amended U.S. Individual Income Tax Return
Instructions for Form 1040X – IRS
Publication 17 – Your Federal Income Tax – IRS
Publication 594 – The IRS Collection Process – IRS