Can the IRS take my state refund? Yes, in most states

Can the IRS take my state tax refund for federal taxes?

Yes. The IRS runs the State Income Tax Levy Program, which matches people with unpaid federal tax against state income tax refunds in participating states. When there is a match, the state sends the refund, or the part needed, to the IRS instead of to you. The IRS says the program currently covers individual state refunds only.

Most of the states that have an income tax take part, including large states such as California, New York, Georgia, Illinois, New Jersey, North Carolina, Pennsylvania and Virginia, according to the IRS privacy impact assessment for the program. States without a personal income tax have no refund to levy.

What must happen before the IRS levies a state refund

A state refund levy is not the first step in collection. The tax must have been assessed and billed, you must not have paid it, and the IRS must have sent a Notice of Intent to Levy. The CP504 notice is that notice, and the IRS says in its CP504 explanation that it can seize any state tax refund you are entitled to if you do not pay or make arrangements.

Because a state refund levy can follow the CP504 directly, your right to a collection hearing comes after the levy rather than before it. The IRS sends a notice of that right once the levy has happened.

Can a state take my federal refund?

Yes, through a different system. The Bureau of the Fiscal Service runs the Treasury Offset Program, which can reduce a federal tax refund to pay past-due state income tax, certain state unemployment compensation debts and child support collected by state agencies. The state reports the debt; the Fiscal Service takes the money and sends it to the state.

The two systems are easy to confuse because both end with a refund going to a government you owe. The difference is who holds the debt and which refund gets taken. For the federal side in detail, see the Treasury Offset Program and tax refund offset.

State refund reduced to 0: how to tell who took it

A state refund that shrinks or disappears is not always the IRS. States also apply refunds to their own debts, such as past-due state tax from another year, and many run intercept programs for state agency debts and child support. The notice you receive tells you which one happened.

For an IRS levy, participating states must send you a notice that the refund was levied and applied to a federal tax debt, with the amount and a pointer to the IRS. The IRS then issues its own Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing, unless you already received a pre-levy hearing notice. Check your state's refund tracker as well; our state tax refund status page links to the largest states' tools.

What to do next

The right move depends on which government took the money and whether you owe the debt.

1. Identify the notice: IRS, state revenue department, a state agency or the Bureau of the Fiscal Service.
2. If the IRS levied your state refund and you believe the federal balance is wrong or already paid, respond to the post-levy hearing notice by its deadline and contact the IRS at the number on that notice.
3. If you owe the federal balance, check your IRS online account to confirm the levied amount was credited and see what remains.
4. If a state took your federal refund, dispute the debt with the state agency named on the Fiscal Service notice, not with the IRS.
5. If the refund was on a joint return and only your spouse owed a federal-side debt, look at Form 8379, injured spouse allocation.
6. Before next season, set up a payment arrangement or pay the balance so the 2027 state and federal refunds are not taken again.

If you think an offset was taken in error, see tax refund offset reversal for the situations in which money can be returned and who pays it back.

Can the IRS take my state refund if I am on a payment plan?

Levy is a collection action for unpaid balances that have gone through the notice process. Once you arrange to pay, contact the IRS if a levy notice arrives anyway, and keep your agreement paperwork handy. Separately, a federal refund can still be applied to a federal balance while you are on a plan; the IRS applies refunds to existing federal tax debts.

Whether a specific payment plan stops a particular levy depends on the plan's terms and timing, so confirm with the IRS using the number on your notice. Payment plan options are listed on the IRS payment plans page.