IRS Tax Liability Guide

Service Members and Veterans Who Owe the IRS

Last reviewed October 2026Reviewed by Safwan Al-Sayyad, Global Gate Tax and Accounting

Short answer

Combat zone and qualifying contingency service puts IRS deadlines on hold, including payment, assessment and collection, for the time served plus 180 days. Tax owed before active duty can qualify for a Servicemembers Civil Relief Act interest cap or deferral. VA service-connected disability benefits cannot be levied, but military retirement pay can.

Key takeaways

  • IRC 7508 disregards combat zone or contingency operation service plus 180 days for filing, paying, assessment and IRS collection, and no penalties or interest are charged for that extension period.
  • The IRS may act before it knows you qualify, so tell it: the IRS accepts notice at combatzone@irs.gov (no Social Security numbers in the email).
  • For income tax owed before active duty, the SCRA caps the interest rate during service if you send the IRS your orders no later than 180 days after release.
  • Service-connected VA disability benefits are exempt from IRS levy under IRC 6334(a)(10); military retirement pay is on the IRS federal payment levy list.
  • After the protections end, the usual payment plans, hardship status and free help from the Taxpayer Advocate Service apply.

Combat zone and contingency service: IRS deadlines pause

Under Internal Revenue Code section 7508, the time you serve in a combat zone, or deployed outside the United States in a contingency operation designated by the Secretary of Defense, plus any continuous qualified hospitalization for an injury received there and the next 180 days, is disregarded for a long list of tax deadlines. The list in the statute includes:

  • filing returns and paying income, employment and other taxes, including installments;
  • assessment of any tax by the IRS;
  • notices and demands for payment;
  • “collection, by the Secretary, by levy or otherwise” of any tax liability;
  • filing a Tax Court petition or a refund claim; and
  • certification of a seriously delinquent tax balance for passport purposes (section 7508(a)(3)).

IRS Publication 3 (2025) adds that the deadline is extended by the 180 days plus the days that were left to act when you entered the combat zone, and that “no penalties or interest will be imposed for failure to file a return or pay taxes during the extension period.” The IRS also says it works with the Department of Defense to suspend compliance actions, “such as audits or enforced collections,” until 180 days after you leave the zone.

The protection also covers your spouse, with two exceptions listed in Publication 3: it does not apply to a spouse for any period you are hospitalized in the United States, or for tax years beginning more than 2 years after the area stops being a combat zone. Civilians serving in the zone in support of the Armed Forces, such as Red Cross personnel and civilians acting under military direction, also qualify; employees of defense contractors working elsewhere do not. Time hospitalized in the United States counts for at most 5 years, and the hospitalization part does not extend the IRS’s collection period (IRC 7508(e)(3)).

Tell the IRS you qualify, and what to do if a notice arrives anyway

The statute lets the IRS assess and collect unless it has learned before acting that you are entitled to the extension (IRC 7508(e)(2)). In practice, notices can still be issued while you are deployed. Two ways to close that gap:

  1. Email the IRS. The IRS accepts notice at combatzone@irs.gov. Give your name, stateside address, date of birth and deployment date, and attach an official document showing the area or operation. The IRS says not to include Social Security numbers in the email and that account answers come by regular mail.
  2. Contact your legal assistance office if the IRS takes a covered action or sends an examination notice before learning about your service, as Publication 3 advises.

The IRS combat zone Q&As tell families filing under the extension to put “COMBAT ZONE” in red at the top of the return. If a balance-due notice such as a CP14 or a CP504 reaches your family at home, they or a representative you have authorized should answer it rather than letting it sit. Combat zone time also pauses passport certification for a seriously delinquent balance; see passport revocation for unpaid taxes.

Payment plans and old balances during deployment

If you were already on an installment agreement before deploying to a combat zone, the IRS combat zone Q&As say the member “will not have to make payments on his past due taxes for his period of service in the combat zone plus 180 days,” and no additional penalties or interest are charged during that extension period. The IRS says to contact the IRS office where you make payments. Confirm in writing that the IRS has recorded the pause, because a missed payment otherwise leads to a CP523 notice of intent to end the plan.

Payments resume after the extension. Interest and penalties then continue as on any balance: interest at the federal short-term rate plus 3 percentage points, reset quarterly (7% (IRS.gov, Jul-Dec 2026) this quarter).

Tax owed before active duty: the SCRA interest cap and payment deferral

The Servicemembers Civil Relief Act gives two protections that apply to IRS income tax balances, as IRS Publication 3 describes them:

Protection Who it covers How to get it
Interest rate cap Tax incurred before you entered active service (50 U.S.C. 3937). Interest above the statutory cap is forgiven for the period of military service, whether or not service affects your ability to pay. Send the IRS a copy of your orders or reporting instructions no later than 180 days after release from military service.
Deferral of payment Income tax that becomes due before or during service, if service has materially affected your ability to pay. Not available for the employee’s share of Social Security and Medicare tax. Written request to the IRS office handling your account (or, with no plan, after you receive a payment notice), listing pre-service and current income, military rank, date of entry and expected discharge; orders help.

A granted deferral gives you up to 180 days after release to pay without interest or penalties for that period, and the IRS collection period is suspended during service plus 270 days. The IRS answers deferral requests in writing. National Guard members qualify for service under a federal call to active service of more than 30 consecutive days for a declared national emergency, as Publication 3 explains.

Practical point: the SCRA cap matters most when the IRS rate is higher than the cap, and it only reduces interest. Ask in writing, keep a copy, and check your next account transcript to confirm the adjustment posted.

Veterans: what the IRS can and cannot levy

Once a veteran has received the required notices, the IRS can levy wages, bank accounts and many federal payments. Two rules matter most:

  • VA disability benefits are protected. IRC 6334(a)(10) exempts from levy any amount payable as a service-connected disability benefit under the listed chapters of title 38. VA disability compensation and pension payments are also not taxable income, per IRS Publication 525.
  • Military retirement pay can be levied. The IRS lists military retirement among the payments in its Federal Payment Levy Program, which takes up to 15% (IRS.gov, 2026) of each payment, or the amount owed if less. Before this levy starts, the IRS normally sends a final notice such as a CP90 and waits 30 days.

The IRS says the program will not include your payments while you are in bankruptcy, have applied for innocent or injured spouse relief, have made other payment arrangements, or are in a hardship status. Social Security benefits can also be levied this way; see can the IRS take Social Security. For levy steps and how to stop them, see the best ways to stop an IRS levy.

Your options once the military protections end

Situation Option Key terms
You can pay within months Short-term payment plan Up to 180 days (IRS.gov, 2026), no setup fee
Monthly payments needed Simple Payment Plan (formerly the streamlined installment agreement) $50,000 (IRS.gov, July 2026) or less, paid by the CSED (IRS.gov, July 2026); $29 (IRS.gov, 2026) setup online with direct debit
Income only covers basic living costs (for example, VA disability only) Currently not collectible status Collection pauses; interest continues; see CNC
The balance can never be paid in full Offer in compromise Run the IRS Pre-Qualifier; fee $205 (IRS.gov, 2026) unless low-income

Penalties from years when deployment or injury kept you from filing may be removable for reasonable cause or under the Automatic Exemption from Penalty (IR-2026-83 (IRS.gov, July 2026)); see penalty relief. To stop collection while you decide, read how to pause IRS collection, and for larger balances, relief by balance size.

Records to gather, and a worked example

  • Orders, deployment and return dates, and any document naming the combat zone or operation.
  • Hospitalization dates if you were injured.
  • IRS notices and your account transcript, plus any installment agreement letters.
  • Leave and earnings statements before and during service, for an SCRA request.
  • VA award letters and retirement pay statements, if you are a veteran facing a levy.
Example (assumed figures). Before joining active duty, Marcus ran a small business and owed $9,000 for one tax year. He was on a monthly installment agreement when he deployed to a combat zone on February 1, 2026, and left the zone on September 30, 2026. He emails the IRS with his deployment documents, and his payments are not due during his time in the zone plus 180 days: September 30, 2026 plus 180 days is March 29, 2027. No penalties or interest are charged for that period. He also sends the IRS a copy of his orders to claim the SCRA interest cap on the pre-service balance for his time in service, and resumes payments after March 29, 2027.

Free help for service members and veterans, and when to hire someone

Free help is broad here. Base legal assistance offices handle combat zone notices. The military VITA program prepares returns and knows combat zone rules, and the Department of Defense offers MilTax, a free tax service through Military OneSource, to members and qualified veterans. The Taxpayer Advocate Service is free when an IRS problem causes hardship or is stuck (877-777-4778 (IRS.gov, 2026), or Form 911, Rev. 6-2026 (IRS.gov, 6-2026)). Low Income Taxpayer Clinics represent eligible taxpayers for free or a small fee. Your collection rights are summarized in your IRS collection rights.

A professional is worth it when several years are unfiled, the IRS levied before applying your combat zone or SCRA rights, a military retirement levy is already running, or the balance is beyond the plan limits. A representative can act under Form 2848 while you are deployed. Request a free review or read what a free consultation covers; if free military help will solve it, we will say so.

Frequently asked questions

Generally no. IRC 7508 disregards your combat zone or qualifying contingency service plus 180 days for IRS collection by levy or otherwise, assessment and payment deadlines. The IRS can still act if it does not know you qualify, or in jeopardy and bankruptcy situations, so notify it.

Sources

  1. 26 U.S.C. 7508, Time for performing certain acts postponed by reason of service in combat zone
  2. IRS Publication 3 (2025), Armed Forces' Tax Guide
  3. IRS: Extension of deadlines, combat zone service (Q&As)
  4. IRS: Notifying the IRS by email about combat zone service
  5. IRS: Filing extensions and tax return preparation assistance for military personnel
  6. 50 U.S.C. 3937, Maximum rate of interest on debts incurred before military service
  7. 26 U.S.C. 6334, Property exempt from levy
  8. IRS Publication 525 (2025), Taxable and Nontaxable Income
  9. IRS: Federal Payment Levy Program
  10. IRS: Penalty relief due to reasonable cause
  11. Taxpayer Advocate Service

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This page is general information about IRS rules, not tax or legal advice for your situation. IRS figures change; each one links to its official source and the date we last checked it.