If you owe back taxes to both the IRS and your state, one of the first questions we hear is simple and reasonable:
Who should I pay first?
Most people assume the answer is the IRS. Federal taxes feel bigger, scarier, and more consequential. But in many cases, especially when the balance is significant and you cannot pay everything at once, prioritizing the state is the smarter move.
Here is why state tax agencies are often more aggressive, why timing matters, and how strategic sequencing can help you protect your income and assets while working toward a full resolution.
Why the State Is Often the Immediate Threat
The IRS has a reputation for being powerful, and in the long run, federal tax enforcement does carry serious consequences. But in the short term, state tax agencies are often faster, more aggressive, and less predictable.
We regularly see states move quickly to:
• Garnish wages
• Freeze bank accounts
• Suspend business licenses
• Suspend driver’s licenses
• Refer cases to private collection agencies
While the IRS may take months or even years before escalating enforcement, state tax agencies can act in a matter of weeks. If you are caught off guard, that speed can disrupt your finances almost overnight.
Why States Rush to Enforce Before the IRS
There is a strategic reason states move so quickly, and it has nothing to do with punishment.
Once the IRS files a federal tax lien or levy, federal supremacy applies. Federal claims generally take priority over state claims. That means if the IRS gets involved first, the state risks being pushed to the back of the line and may never fully collect what it is owed.
States know this. As a result, they often accelerate enforcement early to secure payment before the IRS asserts priority.
This is not personal. It is structural. And if you are trying to preserve cash flow or protect key assets, this distinction matters.
Why the IRS Is Often More Flexible in the Short Term
Surprisingly, the IRS is usually slower and more flexible than state agencies when it comes to enforcement strategy.
The IRS offers multiple long-term resolution tools, including:
• Installment agreements
• Temporary hardship status
• Offers in compromise in appropriate cases
• Collection holds during active negotiations
This flexibility gives taxpayers room to breathe while they work through a comprehensive plan. States, by contrast, often focus on immediate collection and are less patient when payments are delayed.
The Strategic Recommendation
If you owe both state and federal back taxes and cannot pay everything at once, we usually recommend prioritizing the state.
That does not always mean paying the state in full immediately. It often means getting the state into a formal resolution as quickly as possible, such as:
• Setting up a payment plan
• Placing the account into hardship or non-collectible status
• Negotiating a settlement if available under state law
Once the state is stabilized, you can address the IRS using a longer-term federal strategy.
This sequencing helps prevent sudden enforcement actions and keeps you in control of your financial situation.
Why This Is About Timing, Not Just Amounts
When dealing with multiple tax authorities, the question is not only how much you owe. It is when enforcement will occur and who has the power to act first.
A poorly timed enforcement action can freeze accounts, interrupt payroll, or threaten a business even when a taxpayer is willing and able to resolve the debt properly.
Strategic sequencing allows you to pay on your terms, not the government’s.
The Bottom Line
If you owe significant back taxes to both the state and the IRS, this is not a do-it-yourself situation. The order in which you act can determine whether you maintain control or lose it.
If you are facing pressure from both the state and the IRS, let us help you put a plan in place. Contact us today to schedule a consultation.
This article is general information about tax and accounting topics and is not advice for your situation. Rules change; check the published and updated dates above and confirm current law before acting. Reading this article or contacting Gordon Tax does not create a client relationship.