If I owe the IRS $900.00, will I still receive my tax refund?

In September this year I received a letter from the IRS stating that in 2007 income was not reported and I now owe them approx. $900. Should I wait to file my income tax( CA) in the new year and with my tax refund pay the IRS? I honestly don't know how this works, can someone please educate me on whether or not I should make installment payments until then? Also, will I still be able to receive my tax refund or not until I pay the amount due OR does the IRS deduct the amount owed from my tax refund? I have a family of four ( Myself, working husband, 2 kids), Thanks for you help =) It's really appreciated. I live in CA.