State Tax Debt

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What is state tax debt?

State Tax Debt

When an individual lives, or a business operates, in a state where an income tax is collected, there are state tax debt issues that are bound to arise. Income taxes are the largest revenue generating sources of income for states.

What is unique about a state income tax debt issue is the fact that the IRS partners with many states in collecting unpaid taxes. The program is titled ‘State Income Tax Levy Program. This Program allows the IRS to take (levy/seize) your state income tax refund to pay your unpaid IRS bill. You will receive a Notice of Levy on your State Tax Refund from your State.

Other state taxes that may be accumulating in your state tax debt include:

  • Real estate taxes
  • Personal property taxes
  • Death taxes (put upon an estate at death)
Employer related:

  • Excise taxes (tobacco, fuel, alcohol)
  • Sales and use taxes
  • Payroll related
  • Other business taxes
Penalties and interest usually accrue on unpaid state tax debt. Each state has its own collection process, also. Just be aware that in addition to federal (IRS) tax debt, you may be responsible for state tax debt. Check with your state's taxing authority to be certain all that is involved.



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Jolyn Wells-Moran