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IRS CP242 Notice

Notice That Your State Tax Refund Was Taken, and Your Right to a Hearing

The IRS took a state tax refund to pay a federal balance. The hearing right on this notice comes after the fact.

What is CP242? CP242 tells you the IRS garnished your state tax refund to pay your federal taxes, and that you have the right to a Collection Due Process hearing if you disagree.

What This Notice Means

CP242 tells you the IRS garnished your state tax refund to pay your federal taxes, and that you have the right to a Collection Due Process hearing if you disagree.

A state tax refund is the one thing the IRS can levy without offering a hearing first — section 6330(f)(2) excepts it, and gives the hearing opportunity afterward instead. This notice is that opportunity arriving.

The IRS states it can also file a Notice of Federal Tax Lien, which it describes as a public notice that it has a claim against your property and which can affect your ability to get credit.

Why You Received This Notice

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    The IRS states it garnished your state tax refund to pay your federal taxes.

Important Deadline

The IRS says to submit a request for a Collection Due Process hearing on Form 12153 by the due date on your notice.

It does not publish a number of days on this page. The date printed on your notice is the one to work from.

What You Should Do

  • Pay what you owe. If you cannot pay the full amount, the IRS points to its payments page for payment plans, the offer in compromise, and temporary collection delays.
  • Call the IRS if you have already paid in full, or think a payment you submitted is missing.
  • If the IRS has notified you that collection activity is suspended because you have a financial hardship, the IRS states you do not have to do anything.
  • If you disagree, submit Form 12153, Request for a Collection Due Process or Equivalent Hearing, by the due date on your notice.
  • If you want someone to contact the IRS for you, it points to Form 2848.

Resolution Options That May Help

Payment Plan

Taxpayers with steady income who can afford monthly payments

OIC

Taxpayers who cannot pay their full tax liability

CNC Status

Taxpayers experiencing severe financial hardship

What NOT to Do

  • Do NOT assume this is a warning. The refund has been taken.
  • Do NOT assume the hearing right is spent. The IRS states you have one if you disagree, and names three reasons for requesting it.
  • Do NOT ignore the lien language. The IRS states it can file a Notice of Federal Tax Lien, which reaches wages and income, bank accounts, business and personal assets including a home and car, state tax refunds, and Social Security benefits.

Frequently Asked Questions

What are the reasons for requesting a CDP hearing?
The IRS names three on this notice: you do not agree with the amount due; you want to provide additional information that may impact your case; or you want to contest the levy and future levies.
How is this different from CP92?
Both report that the IRS took a state tax refund and both carry a Collection Due Process hearing right afterward. The IRS publishes them as two separate notices and does not state on either page which taxpayer type each is issued to, so this page does not tell you either. Read the notice you received.
Can the IRS also file a lien?
The IRS states it can file a Notice of Federal Tax Lien, which it describes as a public notice saying the IRS has a claim against your property, and which can affect your ability to get credit. It states the lien applies to wages and income, bank accounts, business and personal assets such as a home and car, state tax refunds, and Social Security benefits.
What if I am already in hardship status?
The IRS states that if it has notified you collection activity has been suspended because you have a financial hardship, you do not have to do anything.

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Related Notices

CP92Notice of Levy on Your State Tax RefundCP90Final Notice of Intent to LevyCP297Final Notice - Businesses - Intent to LevyCP504Notice of Intent to Levy (IRC §6331(d))LT11LT11 / Letter 1058: Notice of Intent to Levy and Your Right to a Hearing

Recommended Next Steps

  • Find the due date printed on your notice.
  • Check whether the refund amount taken matches what the notice says.
  • If you disagree with the amount, want to provide information that may affect your case, or want to contest this levy and future levies — the IRS names all three as reasons — Form 12153 is the route.
  • If you cannot pay the remaining balance, the IRS names payment plans, the offer in compromise and temporary collection delays.

What this page does not say

  • The IRS publishes CP92 and CP242 as separate notices with near-identical subject matter — both report a state tax refund taken and both carry a post-levy Collection Due Process right. Neither page states which taxpayer type it is issued to. Until a source establishes the distinction, neither record asserts one.

Sources and last reviewed

Sourced to primary IRS materials and editorially reviewed on 2026-08-21. Not reviewed by a tax professional. Not tax advice. This page explains a notice in general terms and is not tax or legal advice about your situation. Always use the dates and instructions printed on the notice you actually received. Report a correction.