Asked by vickicastro75  |  Submitted February 12, 2016

If you owe 2015 Federal taxes does the IRS take your state refund for 2015 to pay what you owe?

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  Answers  |  1

March 17, 2016

The IRS will not directly take your state refund - your state won't send the money to the IRS. The state will send you a check (or make a direct deposit). The IRS will be very happy to make a direct withdrawal from your bank, but there's no guarantee that the state refund will arrive in your bank account before the federal government pulls their payment.

Note that if you got a refund from your state, and you *itemized* your deductions (including state income taxes you paid) -- that state refund may actually be *taxable* on your federal income taxes!

(Because you took a deduction for those taxes you overpaid, and when you get them back, you have to effectively undo that deduction)

If you didn't itemize, you probably won't owe federal income taxes on the value of the state tax refund.

If you have any questions, I strongly recommend consulting with a professional. This stuff can get messy, though the software nowadays usually does a pretty great job about asking about those issues I noted above.

Jeffrey Schneider
Tax Professional | 03.01.18 @ 19:00

The IRS CAN and does take state refunds, depending on where in the cycle you are. If you receive a CP-504 notice, that is notice that they IRS will go after your state refund.

$commenter.renderDisplayableName() | 01.24.21 @ 02:30