Short answer
Yes, the IRS can take your state income tax refund to pay a federal balance. Under the State Income Tax Levy Program, participating states match their refunds against IRS files and send matched refunds to the IRS. A CP504 notice is enough warning, so the levy can come before any hearing; a CP92 with hearing rights follows.
Key takeaways
- The State Income Tax Levy Program lets the IRS take individual state income tax refunds in participating states to pay federal balances.
- A CP504 notice of intent to levy is the only warning required; IRC 6330(f) moves the hearing to after the levy, through the CP92.
- A payment plan, a pending offer, a CDP request, bankruptcy or an innocent or injured spouse claim keeps you out of the program; hardship status may not.
- A state refund levy, a federal refund offset and a Treasury offset for state taxes are three different things with different fixes.
- A spouse who does not owe can claim back their share as a wrongful levy, generally within 2 years.
How the IRS takes a state tax refund
Under the State Income Tax Levy Program (SITLP), the IRS can levy (take) your state income tax refund to pay a federal tax balance. The IRS says it “matches federal tax delinquent accounts against a database of state tax refunds for states participating in SITLP.” Here is how the IRS manual (IRM 5.19.9.3, revised February 2026) describes the process:
- States sign up. Each state with an income tax can sign an agreement with the IRS to apply state refunds to federal balances.
- The IRS sends a levy file. In most cases every two weeks (weekly for a few states), the IRS sends each participating state an electronic file of qualifying federal balances together with a notice of levy (Form 668-A).
- The state matches and pays. The state checks the file against its refunds and sends all or part of a matched refund to the IRS. Some states keep a small part of the refund first to cover their cost of handling the levy.
- It runs almost all year. The program starts in mid-January and ends by mid-December each year, so it is not limited to the spring filing season.
- It takes time to show up. The manual says it generally takes up to 4 weeks from the state receiving the file until the money is applied to your IRS account, sometimes longer.
The IRS says the program currently applies only to individual state tax refunds, not business refunds. Two smaller programs work the same way: the Municipal Tax Levy Program for city income tax refunds, and a levy on the Alaska Permanent Fund Dividend, which the IRS says comes with a notice before the levy.
Why a CP504 is enough warning
For most levies, the IRS must first send a final notice with Collection Due Process (CDP) hearing rights, such as an LT11 or Letter 1058. A state refund levy is one of four exceptions. IRC 6330(f)(2) says that when the IRS levies a state to collect from a state tax refund, the hearing rules don’t apply before the levy, “except that the taxpayer shall be given the opportunity for the hearing … within a reasonable period of time after the levy.”
The IRS still has to give written notice of its intent to levy at least 30 days in advance (IRC 6331(d)). That is the CP504. The IRS’s CP504 page says that if you don’t pay, the IRS can levy your income and bank accounts and seize property, “including your state income tax refund.” Our CP504 vs LT11 explainer shows how the two notices differ.
| Notice | When | What it does |
|---|---|---|
| CP504, Notice of Intent to Levy | Before the levy | Legal notice of intent under IRC 6331(d); after it, your state refund can be levied. No hearing right. |
| Notice from your state | After the levy | The state must tell you your refund was levied and applied to a federal balance, and refers you to the IRS. |
| CP92, Seizure of your state tax refund and notice of your right to a hearing | After the levy | Sent by certified mail with Form 12153. Gives you a CDP hearing on the levy, by the date in the notice. |
Two details from the IRS manual: you don’t get a CP92 for tax periods where you already received a CDP notice (unless more tax was assessed afterward), and on a joint balance each spouse gets a separate CP92. A CDP hearing after the levy can still consider a payment plan, an offer or hardship status; see our CDP hearing explainer.
Which states take part
The IRS manual (IRM 5.19.9.3, rev. 02-19-2026) lists these participating states: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Virginia, West Virginia and Wisconsin.
That is 39 of the 42 jurisdictions with an income tax that the manual counts. If you live in a state that is not on the list, or in a state without an income tax, this program does not apply to you, but the IRS can still use other levies. The list can change, so treat it as the IRS’s current list, not a promise.
State refund levy, federal refund offset and state offsets are different
Three different programs can take a refund, and people mix them up. The fix depends on which one hit you.
| What happened | Program | Who to contact |
|---|---|---|
| Your state refund paid a federal tax balance | IRS State Income Tax Levy Program (a levy) | The IRS, at the number on the state’s notice or the CP92 |
| Your federal refund paid a federal tax balance from another year | IRS refund offset (IRC 6402(a)), not a levy | The IRS; see refund offsets |
| Your federal refund paid a state tax bill or other non-IRS claim | Treasury Offset Program | The state or agency that claimed it, not the IRS |
The IRS manual explains a common filing-season surprise: a federal refund is offset to pay a balance, and then the state refund is levied for the same balance because the federal refund offset had not posted to the account yet. In that case, the manual says, the state refund money is refunded to you once it posts, as long as you have no other balance.
Collecting state taxes you owe to your state is the state’s process, not the IRS’s, and is outside this guide.
When the program skips you
The IRS manual lists account conditions that keep a balance out of the State Income Tax Levy Program:
- an offer in compromise pending or accepted;
- an installment agreement pending before the levy, or approved;
- a CDP hearing request filed;
- bankruptcy or litigation;
- an innocent spouse or injured spouse claim;
- an open disaster case, or a military deferment or combat zone indicator;
- a pending amended return claim;
- an expired collection statute; and, one year after death, a deceased taxpayer’s account.
Hardship status may not protect your state refund. The manual’s selection criteria for this program include accounts closed as hardship cases, and a hardship closure is not on the exclusion list. That is different from the federal payment program, which excludes hardship accounts (see federal payment levies). If you are in currently not collectible status and expect a state refund, assume the IRS may take it, and ask the IRS when you get the CP92 if the levy is causing a hardship.
How to stop the next state refund levy
The levy repeats every year your balance stays open and you have a state refund coming. These steps stop it:
- Check what is owed. Your IRS Online Account shows the balance by tax year. Look for the CP504 and any CP92 in your mail.
- Request a hearing if you got a CP92. Send Form 12153 by the date in the notice. Appeals can consider a payment plan, an offer, hardship or whether the levy was proper.
- Set up a payment plan. An installment agreement that is pending before the levy, or approved, keeps you out of the program. Individuals who owe $50,000 (IRS.gov, July 2026) or less can usually set up a Simple Payment Plan (formerly the streamlined installment agreement) online; a direct debit plan applied for online costs $29 (IRS.gov, 2026) to set up.
- Consider an offer. A pending offer in compromise also keeps you out of the program while it is being considered. It fits only if you cannot pay in full within the collection period.
- File every return. Most payment plans and offers require all required returns to be filed. Our guide to pausing IRS collection compares the options.
A release usually stops only future levies. To ask for money already taken, you need a return request under IRC 6343(d); see getting levied money back.
If part of the refund was your spouse's money
If you filed a joint state return but only your spouse owes the IRS, part of the levied refund may be yours. The IRS manual says a non-liable spouse in this situation is not an “injured spouse” (that remedy is for federal refunds). Instead, they are treated as a third party and can file a written administrative claim for return of wrongfully levied property under IRC 6343(b).
- What to send. The manual lists a copy of the state’s levy notice and the amount you want back, the state and federal returns for that year, any information from the state, and Form 8379 or Form 8379-A, used as a guide to show how much of the refund is yours.
- Deadline. For levies on or after March 23, 2017, the manual says a request must be made before 2 years from the date of the levy payment.
- Court option. A non-liable spouse may also sue for wrongful levy under IRC 7426.
- Burden of proof. It is on the spouse making the claim.
Publication 4528 explains how to make a wrongful levy claim. Divorce adds further issues; see divorce and IRS balances and innocent spouse relief if the balance itself was your spouse’s doing.
Doing it yourself, and when to get help
For most people a state refund levy is a signal, not an emergency: the money is gone, and the job is to stop the next levy. If you qualify for an online payment plan, you can usually do that yourself. Low Income Taxpayer Clinics help eligible taxpayers for free or a small fee, and the Taxpayer Advocate Service (877-777-4778 (IRS.gov, 2026)) helps when IRS action is causing a hardship.
Help is worth considering when the levy is one of several (wages, bank, federal payments), you owe more than the online plan limits, a spouse’s share needs to be claimed back, or you have unfiled years. Global Gate Tax Relief offers a free, no-obligation consultation. If it takes the case, it files Form 2848, pulls your IRS transcripts and quotes a flat fee upfront, and it makes no promises about outcomes. Request a free case review or call 1-877-800-8180.
Frequently asked questions
Yes. Through the State Income Tax Levy Program, participating states match their refunds against IRS files and send matched refunds to the IRS to pay a federal balance. A CP504 notice of intent to levy is enough warning; the hearing notice (CP92) comes after the levy.
Because the law makes state refund levies an exception. IRC 6330(f) lets the IRS levy a state tax refund before a hearing and give you the hearing within a reasonable time afterward. That is the CP92, unless you already received a CDP notice for those tax years.
Only in limited cases: the levy was premature or improper, you entered an installment agreement, return would help collect the tax, or it is in your and the government’s best interests (IRC 6343(d)). Ask in writing, generally within 2 years. If part of the refund belonged to a spouse who does not owe, that spouse can file a wrongful levy claim.
Yes. The IRS manual excludes accounts with an approved installment agreement, or an agreement request pending before the levy, from the program. Set the plan up before your next state refund is issued.
It may. The IRS manual’s selection criteria for the State Income Tax Levy Program include accounts closed as hardship cases, unlike the federal payment program. If losing the refund causes a hardship, tell the IRS when you get the CP92.
The IRS manual lists 39 participating jurisdictions, including California, New York, Illinois, Pennsylvania, Ohio and Georgia. The full list is on this page; it can change.
Sources
- IRS: Federal and state levy programs
- IRS: Levy programs toolkit
- IRS: Understanding your CP92 notice
- IRS: Understanding your CP504 notice
- IRM 5.19.9, Automated Levy Programs (rev. 02-19-2026)
- IRS Publication 594, The IRS Collection Process (Rev. 1-2026)
- IRS Publication 4528, Making an Administrative Wrongful Levy Claim
- 26 U.S.C. 6330, Notice and opportunity for hearing before levy
- 26 U.S.C. 6331, Levy and distraint
- 26 U.S.C. 6343, Authority to release levy and return property
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