The IRS is a federal agency, not a state one

The Internal Revenue Service (IRS) is part of the U.S. Department of the Treasury and operates at the federal level only. It collects federal income tax, enforces federal tax law, and handles disputes about federal taxes owed to the U.S. government. The IRS has no state authority and does not collect state taxes.

Every state except Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming runs its own separate tax agency that collects state income tax. These state agencies operate independently from the IRS, though they often use similar rules and forms. When you file taxes, you file two separate returns: one federal (to the IRS) and one state (to your state's tax agency), unless your state has no income tax.

The confusion arises because federal and state tax systems overlap in timing, terminology, and some procedures. But they are distinct organizations with different rules, different penalties, and different collection powers.

Key Takeaways

  • The IRS collects federal income tax only and is run by the U.S. Department of the Treasury, not by any state.
  • Most states run their own tax agencies that collect state income tax separately from the IRS.
  • Eight states have no state income tax and therefore no state tax agency.
  • Filing taxes means submitting two separate returns—one federal to the IRS and one state to your state's tax agency—unless you live in a no-income-tax state.

How the IRS and state tax agencies differ

The IRS and state tax agencies have different rules about what income is taxable, what deductions you can claim, and what the penalties are for owing money. For example, the federal standard deduction for 2024 is one amount nationwide, but your state's standard deduction (if it has one) may be different. Some states tax retirement income; the federal government does not. Some states allow deductions the IRS does not.

Penalties also differ. If you owe federal taxes and do not pay, the IRS charges federal penalties and interest. If you owe state taxes, your state tax agency charges state penalties and interest. Owing one does not automatically mean you owe the other, though it is common to owe both if you underpaid on your federal return and your state uses federal income as the starting point for state tax.

Collection methods differ too. The IRS can place a federal lien on your property, garnish your wages, or intercept your federal tax refund. State tax agencies can do similar things within their state, but they cannot touch your federal refund or place a federal lien—only a state lien.

Which agency handles what

The IRS handles all matters related to federal income tax, including federal tax credits, federal deductions, and disputes about federal tax liability. If you receive a notice from the IRS, it concerns federal tax only. If the IRS audits you, it is auditing your federal return.

Your state tax agency handles all matters related to state income tax. If you receive a notice from your state, it concerns state tax only. If your state audits you, it is auditing your state return. Some states contract with the IRS to use IRS audit results to inform their own audits, but the audits themselves are separate.

If you have questions about whether something is federal or state, look at the letterhead or envelope. Mail from the IRS will say "Internal Revenue Service" or "U.S. Department of the Treasury." Mail from your state will say your state's name and the name of its tax agency—for example, "California Franchise Tax Board" or "New York Department of Taxation and Finance."

States with no income tax

Eight states do not collect state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one of these states, you file a federal return to the IRS but no state return. You still owe federal taxes on your income; you simply do not owe state taxes.

Some of these states collect other taxes instead—sales tax, property tax, or business taxes—but not income tax. If you move to or from one of these states, your federal tax obligation does not change, but your state tax obligation does.

What happens if you owe both federal and state taxes

If you underpaid federal taxes, you may also underpay state taxes, because most states calculate state tax based on federal income. For example, if you claimed a deduction on your federal return that the IRS disallowed, and your state uses the same deduction rules, your state may also disallow it and assess additional state tax.

However, the IRS and your state tax agency do not automatically share information about what you owe. You may receive a notice from the IRS about federal taxes and a separate notice from your state about state taxes. Each agency will contact you independently and expect payment to them. Paying one does not pay the other.

If the IRS intercepts your federal refund to cover federal taxes you owe, that does not affect your state refund. Your state will still send you a state refund if you overpaid state taxes, unless your state has a law allowing it to intercept your state refund to cover state taxes you owe in a different year.

How to contact the right agency

If you have a question about federal taxes, contact the IRS. You can call the IRS at 1-800-829-1040 (for individual tax questions) or visit irs.gov. The IRS also has walk-in offices in most cities.

If you have a question about state taxes, contact your state's tax agency. The name and phone number vary by state. You can search "[your state name] tax agency" or "[your state name] department of revenue" to find the correct office. Most state tax agencies have websites with phone numbers and mailing addresses.

If you are unsure whether a notice or question concerns federal or state taxes, look at the letterhead. If it says "IRS" or "Internal Revenue Service," it is federal. If it says your state's name, it is state.

Frequently Asked Questions

Can the IRS collect state taxes or can my state collect federal taxes?

No. The IRS collects only federal taxes. Your state tax agency collects only state taxes. Neither can collect for the other. If you owe both, you will receive separate notices and must pay each agency separately.

If I live in a state with no income tax, do I still file with the IRS?

Yes. Federal income tax is separate from state income tax. Even if your state does not collect income tax, you still owe federal income tax to the IRS and must file a federal return if your income exceeds the threshold.

Does the IRS know if I owe state taxes?

Not automatically. The IRS and state tax agencies do not share real-time information about what you owe. However, if the IRS audits you and changes your federal return, your state may learn about it through other means and audit you separately.

What if I get a notice from an agency and I am not sure if it is federal or state?

Check the letterhead and envelope. The IRS will say "Internal Revenue Service" or "U.S. Department of the Treasury." Your state will say your state's name and its tax agency name. If you are still unsure, call the phone number on the notice and ask.

Can I deduct state taxes I paid from my federal taxes?

You can deduct state and local taxes (SALT) on your federal return, but only up to $10,000 per year. This deduction is available whether you itemize or take the standard deduction, though the rules are complex. Consult a tax professional or the IRS website for details about your situation.