Quick overview
If you receive IRS Letter 1058, the agency is warning it may intercept your upcoming state income tax refund to apply toward federal tax debt. You should treat this as a time-sensitive collection notice: confirm the debt, review available options, and respond before the deadline. Acting promptly increases your chances of preserving funds or arranging an alternative payment plan.
(Information current as of 2025; IRS collection rules are described in Publication 594, The IRS Collection Process: https://www.irs.gov/publications/p594.)
What does Letter 1058 mean and what is the timeline?
- Letter 1058 is essentially a notice of intent to levy a state tax refund because of unpaid federal taxes. It tells you the amount the IRS plans to claim and provides instructions for how to respond. The law generally requires the IRS to give taxpayers at least 30 days to request a collection review or hearing before a levy (see the Final Notice of Intent to Levy and Your Right to a Hearing rules) (IRS Publication 594).
- Use the 30-day window. If you miss it, the IRS can certify your state refund for offset. States typically send refunds on a schedule; once certified to the IRS, the funds are often applied to the federal balance and cannot be recovered easily.
First 5 actions to take (step-by-step)
- Read the letter closely and note the deadline. Identify the tax year(s) and amount shown.
- Verify the debt. Check your IRS Account online at IRS.gov or call the number on the letter to request a transcript if anything looks incorrect. Keep a record of the call: date, time, representative’s name, and confirmation number (if provided). (See IRS online tools and transcripts: https://www.irs.gov/individuals/get-transcript.)
- Contact your state Department of Revenue immediately. Ask whether your refund has been intercepted yet and, if not, whether there’s a short window to claim the refund before certification to the IRS.
- Decide how you will respond. Common options are: pay the balance, set up an installment agreement, request Currently Not Collectible status, or apply for an Offer in Compromise (OIC). Each option has trade-offs and different processing times.
- If eligible and appropriate, request a Collection Due Process (CDP) hearing using Form 12153 within the letter’s deadline to preserve appeal rights (see IRS Form 12153). A timely CDP request can temporarily halt the levy while the matter is reviewed.
Options to stop or limit a state refund levy
- Pay the full balance shown. If you can, paying the debt in full is the fastest way to stop the levy.
- Set up an Installment Agreement. If you cannot pay in full, an installment agreement with the IRS often prevents the levy. See FinHelp’s guide on setting up an installment agreement for details and how to use Form 433-F (internal link: setting up an installment agreement).
- Internal link: setting up an installment agreement — https://finhelp.io/glossary/setting-up-an-irs-installment-agreement/
- Apply for an Offer in Compromise (OIC). An accepted OIC can settle the liability for less than the full amount and stop collection actions; processing takes longer and includes documentation of income, assets, and living expenses. For guidance and qualifiers, see our Offer in Compromise resources.
- Internal link: Offer in Compromise (OIC) — https://finhelp.io/glossary/offer-in-compromise-oic/
- Request Currently Not Collectible (CNC) status. If you can demonstrate severe financial hardship, the IRS may temporarily suspend collection efforts. CNC does not erase the debt — penalties and interest continue to accrue.
- Request a CDP hearing. Filing Form 12153 within the time on the letter preserves your right to an independent review and may temporarily stop the levy while the case is under appeal (IRS Form 12153).
(For official IRS rules on installment agreements and OICs see https://www.irs.gov/collections and the Offer in Compromise pages on IRS.gov.)
Practical guidance when choosing an option
- Speed matters. If your state refund is imminent and the refund hasn’t been certified to the IRS yet, a short-term installment agreement or immediate payment may be the only practical way to protect that refund.
- Offers in Compromise take longer. If your primary goal is to preserve a single imminent refund, an OIC may not be fast enough unless you have already started the process and the IRS has agreed to hold off on offset while negotiating (rare). For details on OIC documentation and valuation, review our OIC articles.
- Confirm with the state. Some states will hold a refund pending resolution if you can provide documentation of the IRS notice and a reasonable plan. It’s not guaranteed, but it’s worth contacting the state Department of Revenue immediately.
What to include when you respond
- A copy of the letter (keep originals).
- A completed Form 12153 if requesting a CDP hearing.
- If proposing a payment plan, copies of financial forms such as Form 433-F or other supporting income/expense documentation.
- If applying for an Offer in Compromise, complete Form 656 and the financial statements required by the IRS.
- A cover letter that clearly states the relief you are requesting (installment, OIC, CNC, or appeal).
Keep a dated log of every call, person, and representative ID. Mail certified, return receipt requested when sending physical documents to the IRS to preserve proof of timely response.
Communicating with the IRS and the state (scripts and tips)
When you call the IRS:
- “Hello, my name is [Your Name]. I received Letter 1058 dated [date]. I would like to verify the balance and my options to stop a state refund levy. Could you provide the account transcript and advise whether a 30-day CDP period applies?”
When you call your state Department of Revenue:
- “Hello, I received notice from the IRS about a potential levy on my state refund. Has my refund been certified to the IRS? If not, what steps are required to place a temporary hold while I resolve the federal matter?”
Write down the representative name, badge number, and any confirmation numbers.
Common mistakes to avoid
- Waiting to respond: the 30-day window is real and missing it often allows the IRS to certify the refund.
- Assuming the state can’t be helpful: state agencies sometimes will delay sending refunds or explain recovery timelines.
- Using unverified third-party advice: work with a credentialed tax pro (CPA, EA, or tax attorney) if the situation is complex — especially if you plan to file an OIC.
Example scenarios (realistic outcomes)
- Scenario A — Quick payment: Taxpayer pays the balance before certification; refund is released to taxpayer.
- Scenario B — Installment agreement: Taxpayer enrolls in an installment agreement; IRS removes levy on state refund after verifying plan.
- Scenario C — OIC in process: Taxpayer applies for OIC; if the IRS agrees to hold collection during the process (rare), the refund may be released — otherwise the refund is applied to debt.
In my practice, I’ve found expedited installment agreements with direct debit are often the fastest, most reliable way to protect a single imminent state refund while addressing the underlying liability.
Fees, processing times, and appeal rights
- Installment agreements typically have setup fees and may require a direct debit authorization to qualify for lower fees or faster approval. See IRS installment agreement guidance and FinHelp’s walkthrough.
- OIC processing can take several months. There is an application fee unless you qualify for a low-income exception; Form 656 and Form 433-A or 433-F will be required.
- Filing Form 12153 preserves collection appeal rights and can suspend levy actions while the Collection Due Process appeal is pending, subject to specific rules (see Form 12153 instructions on IRS.gov).
When to get professional help
If the balance is large, the tax history is complex, or you plan to submit an Offer in Compromise, hire a qualified practitioner (CPA, EA, or tax attorney). In my 15+ years advising taxpayers, effective representation can materially improve outcomes and avoid errors that delay processing.
Resources and authoritative references
- IRS Publication 594, The IRS Collection Process: https://www.irs.gov/publications/p594
- IRS Form 12153, Request for a Collection Due Process or Equivalent Hearing: https://www.irs.gov/forms-pubs/about-form-12153
- IRS Offer in Compromise information and forms: https://www.irs.gov/individuals/offer-in-compromise
- Consumer Financial Protection Bureau general consumer resources: https://www.consumerfinance.gov
Internal FinHelp resources:
- Offer in Compromise (OIC): https://finhelp.io/glossary/offer-in-compromise-oic/ (for qualifying, forms, and strategies)
- Setting up an IRS Installment Agreement: https://finhelp.io/glossary/setting-up-an-irs-installment-agreement/
Professional disclaimer
This article is educational and reflects general practices current as of 2025. It is not legal or tax advice for your specific situation. For personalized guidance, consult a licensed tax professional (CPA, EA, or tax attorney).
If you want, I can: 1) draft a response letter you can mail with Form 12153, 2) prepare the necessary financial worksheet (Form 433-F) template, or 3) help decide whether an Installment Agreement or OIC makes more sense based on your numbers. Which would you like next?