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Arkansas Statute of Limitations - and How It's Unique

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The Arkansas Tax Procedures {Act 401 of 1979} provides a three year statute of limitations for assessments and refunds {Arkansas Statute 26-18-306(a)(1)}. However, Arkansas is unique in that under assessments, if the taxpayer has understated the tax liability by 25% or more, the state of Arkansas has the right to review and assess six years {Arkansas Statute 26-18-306(e)}. Unfortunately, if the tax is overstated by 25% or more, there is no extension to a six year refund.

The state of Arkansas has the right to make assessments for the three year statute of limitations. While the state of Arkansas has the right to review and assess tax in six years, the state is limited as to the years 4, 5 and 6. When the years 4, 5 and 6 are added, the state of Arkansas can only assess the months in those years that are understated by 25% or more. If a month in years 4, 5 and 6 is understated by 24%, it cannot be assessed tax under the audit.

If the taxpayer has signed a waiver extending the statute of limitations for assessments to a future date, mutually agreed upon, this also extends the statute of limitations for refunds. Sometimes it is in the taxpayer’s best interest to sign a waiver that extends the statute of limitations in order to address overpayments of tax in years 4, 5 and 6 of an audit.

About the Author: B.J. Pritchett, CMI, is the owner of Pritchett Sales & Use Tax Consulting and the Arkansas Sales and Use Tax School based in Hot Springs National Park, Arkansas. Learn more about her by visiting her author bio page.

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. Additional contact options (and Consultation Requests) are also available on B.J.'s associated Firm Profile page.

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