State tax resolution
A federal resolution does not settle a state balance. They're separate authorities, separate programs, and separate clocks.
Most people who owe the IRS also owe a state. It's the same income, the same missing returns, the same difficult year — but two agencies, and they don't coordinate on your behalf.
What catches people out is the assumption that resolving the federal side resolves everything. It doesn't. An accepted Offer in Compromise with the IRS has no effect whatsoever on what a state revenue department is owed, and a federal payment plan doesn't stop a state garnishment.
The other thing worth knowing early: states are frequently faster and more aggressive than the IRS. They tend to run shorter notice sequences, shorter deadlines, and in some cases collection powers the IRS simply doesn't have. People are often surprised that the state moved first.
Where state tax debt behaves differently
The timelines are shorter
The federal notice sequence runs through several stages over months. Plenty of states compress that considerably. A state letter that looks routine may carry a far tighter deadline than its federal equivalent.
The collection powers vary — and some are broader
Depending on the state, a revenue department may be able to garnish wages, levy bank accounts, file liens, seize assets, intercept refunds and lottery winnings, and — in a number of states — suspend or refuse to renew a professional or occupational licence, or a driver's licence.
That last one deserves emphasis, because it isn't a federal power and most people have never heard of it. For anyone whose income depends on a licence — contractors, realtors, insurance agents, medical and legal professionals, cosmetologists, and many trades — a state tax balance can put the licence itself at risk. It's often the point at which a problem someone had been managing becomes urgent.
The programs aren't the same
Some states have settlement programs resembling the federal Offer in Compromise. Some have nothing comparable. Penalty relief provisions differ. Payment plan terms differ. What worked federally may have no state equivalent at all.
The statutes differ
The federal collection period is well known. State collection periods vary, and some states can pursue a balance for considerably longer.
What we handle
Katherine works with state revenue departments in all 50 states, and most of it is handled remotely.
- State income tax balances — payment plans, settlement applications where a state offers one, and penalty relief.
- Unfiled state returns — usually alongside the federal filings, since the underlying information is the same and doing them together is faster and cheaper than doing them twice. More on catching up on unfiled returns →
- State collection defense — wage garnishment and bank levy release, and lien resolution at state level. Similar in concept to federal IRS collection defense, but each state sets its own rules.
- State payroll and withholding tax — for businesses, including state unemployment tax. These frequently escalate faster than the federal equivalent.
- Sales and use tax balances — including for businesses that developed obligations in states they never physically operated in.
- Residency and domicile disputes — where two states each claim you as a resident. Increasingly common with remote work, and expensive when unresolved.
- Voluntary disclosure and amnesty programs — many states run these, some periodically and some continuously. They can substantially reduce penalties for someone coming forward before being contacted. The catch is that they're generally unavailable once the state has already made contact, so timing matters.
Kentucky taxpayers
The office is in Georgetown, and a good share of the practice is Kentucky-based — Georgetown, Lexington, Louisville and Central Kentucky, in person where that's useful.
For Kentucky residents the common pattern is a Department of Revenue balance running alongside an IRS one, often from the same unfiled years. Handled together, the same records and financial disclosure usually serve both.
Kentucky has an additional layer most people don't know about — cities and counties that run their own occupational tax offices, entirely separate from the state. Learn about Kentucky local & city tax resolution →
Being local is a convenience, not a requirement. The work is the same wherever you are.
How this works
Both sides at once
On the first call we establish what's outstanding federally and at state level, and whether either is on a deadline.
Records from both
State transcripts and account information alongside the federal ones. It's frequently the first time someone sees the complete picture.
A strategy that accounts for both
This matters more than it sounds. What you can afford to pay a state affects what the IRS will accept, and vice versa — the two resolutions have to be built to coexist, or one will default the other.
Negotiation with each authority
Separately, because they are separate, but coordinated.
Frequently Asked Questions
Does my IRS settlement cover my state taxes?
No. They're separate authorities. A federal Offer in Compromise has no effect on a state balance, and a federal payment plan won't stop state collection.
Can states garnish wages and levy bank accounts?
Most can, and many can do it faster than the IRS. Some also have powers the IRS doesn't, including licence-related ones.
Can a state really take my professional licence over unpaid taxes?
In a number of states, yes — revenue departments can refer delinquent taxpayers to licensing boards, affecting professional, occupational and in some cases driver's licences. It varies considerably by state and profession. If your livelihood depends on a licence and you have a state balance, this is worth raising on the first call.
Do states offer settlements like the IRS does?
Some do, some don't, and the ones that do use different criteria. It can't be assumed from the federal position.
I moved. Which state do I owe?
Potentially both, for the relevant periods — and occasionally both states claim the same period, which is a residency dispute. These are worth resolving properly, because the amounts involved are frequently larger than people expect.
I work remotely for a company in another state. Do I owe there?
Possibly. State rules on remote workers vary and several have changed recently. It's one of the fastest-growing sources of unexpected state balances.
What is a state amnesty program?
A time-limited or standing program allowing taxpayers to come forward and resolve outstanding liabilities with reduced penalties. Terms vary by state, and eligibility usually depends on coming forward before the state contacts you.
Do you work in my state?
Yes — all 50.
Deal with both at once
If you owe federally and at state level, handling them together is faster, usually cheaper, and avoids building two resolutions that undercut each other. Tell us what you're facing on both sides.