Just because the IRS “claims” you owe a tax debt, does not mean that you do. If a return was filed incorrectly creating the liability, then it can be amended if within statute. If not, an OIC based on doubt to liability can be submitted for consideration. To answer your question, if you take out your deferred compensation and start taking your pension, the IRS will not come take it out of your hands. However, if you do not address the situation it can get out of control. The IRS may levy your wages and or bank account and can levy up to 15% of your pension when you start receiving if if the CSED has not expired. Question: From what year does this liability come from? One of many questions that begged to be asked! It may be in your best interest to hire an Enrolled Agent, such as myself, or one in your area if preferred to handle this case for you. Don’t pay what you don’t owe and only pay what you can afford to if you do truly owe!