The IRS took my state tax refund without warning. Is that legal?
Yes, and it is the one levy the law lets the IRS make before offering a hearing.
A state tax refund is the exception. Internal Revenue Code section 6330(f)(2) excepts a state-refund levy from the usual requirement that the IRS offer a Collection Due Process hearing beforehand, and gives you the hearing opportunity AFTERWARDS instead.
So the notice arriving after the money has gone is the hearing offer, not an oversight. CP92 states the IRS levied your state tax refund and is informing you of your right to a Collection Due Process hearing. CP242 states it garnished your state tax refund to pay your federal taxes, and that you have the right to a hearing if you disagree.
It is not instant, though, and this is the part the exception does not cover. The IRS must still have sent a Notice of Intent to Levy at least 30 days before the day of the levy, under section 6331(d)(2). CP504 is that notice — which is why a state refund is the one thing CP504 alone can precede.
CP242 names three reasons for requesting a hearing: you do not agree with the amount due, you want to provide additional information that may affect your case, or you want to contest the levy and future levies. The request goes on Form 12153 by the due date printed on the notice.
Publication 1660 lists the state tax refund among four circumstances in which the IRS may levy first and offer the hearing after — the others being jeopardy situations, disqualified employment tax levies, and federal contractor levies.
The records this answer comes from
This page exists because no single one of those answers the question on its own. The answer needs the statute, two notice records and Publication 1660 together. No single one of them contains the whole of it.
Sources
- 26 U.S.C. §6330 — Notice and opportunity for hearing before levy — United States Code, retrieved 2026-08-21
- Understanding your CP92 notice — Internal Revenue Service, retrieved 2026-08-21
- Understanding your CP242 notice — Internal Revenue Service, retrieved 2026-08-21
- Publication 1660, Collection Appeal Rights — Internal Revenue Service, retrieved 2026-08-21
Sourced to primary IRS materials and editorially reviewed. Not reviewed by a tax professional. Not tax advice.