IRS Notice CP523

IRS Notice CP523 and How to Protect Your Payment Plan From Termination

If you receive Notice CP523, the IRS plans to terminate your existing installment agreement. You don’t need to panic yet. In most cases, when you receive this letter, your payment plan is just in default. It has not been terminated yet. You still have time to fix the situation, but you need to act quickly.

Key Takeaways

• What is CP523? This notice means you need to take action or the IRS will terminate your installment agreement.
• When does the IRS send CP523? The IRS sends this notice if you miss a monthly payment, fail to file a tax return, or incur new tax debt.
• How should I respond? Make a payment or cure the default by the deadline to keep your payment plan in good standing.
• What if I don’t respond? The IRS will terminate your installment agreement and demand payment in full.
• What if I don’t pay? The IRS may involuntarily collect the taxes through liens, garnishments, and levies.
• What if I can’t afford to make payments anymore? Talk with a tax attorney or contact the IRS about other options.

Do not ignore Notice CP523. If you need help dealing with this notice, contact us today. At the W Tax Group, we have extensive experience helping people deal with the IRS, and we can help you.

What Does Notice CP523 Mean?

Notice CP523 means that the IRS intends to terminate your existing installment agreement if you don’t catch up on payments or rectify the situation. The IRS sends this notice to taxpayers who have defaulted on their existing installment agreements. 

The notice explains the steps you need to take to avoid termination of your agreement. It also outlines what will happen if you don’t pay – ie, the tax debt will be due in full, and the IRS may use wage garnishments, bank levies, etc. to seize repayment.

If you live in the United States, you will receive this notice through certified mail, and it will come as registered mail if you live outside the country. In other words, the IRS will know if you received the letter — you won’t be able to claim that it got lost in the mail.

What Happens If You Don’t Respond to Notice CP523?

If you don’t contact the IRS or make the payment due within 30 days the IRS may terminate your payment plan. Then, the agency may levy or seize your property or rights to property which can include:

• Wages
• Bank Accounts
• State Income Tax Refunds
• Personal or Business Assets
• Social Security Benefits

Why Do People Receive Notice CP523?

The IRS sends this notice when you have defaulted on an existing tax payment arrangement. Here are some of the reasons that payment plans go into default.

• You missed your monthly payment.
• Your bank returned the payment or denied the automatic withdrawal.
• The IRS requested updated financial information and you failed to provide it.
• The IRS determines that you provided inaccurate information at the time you applied for the installment agreement.
• You failed to file your tax returns by their due date.
• You failed to make your estimated tax payments.
• You incurred a new balance due that is not associated with the agreement and didn’t pay it.

Why Did I Receive Multiple CP523 Notices?

If you are on a payment plan that includes taxes from multiple years, you may receive a CP523 for each tax year. For example, if you are making monthly payments on tax debt from tax years 2021, 2022, and 2023, you will likely receive a notice for each year, even though you’re paying all the tax through a single payment plan.

What Should You Do If You Receive Notice CP523?

If possible, make the required payment prior to the deadline which is 30 days after the notice date on the upper right-hand corner of the letter. This will get your payment plan out of default. To be on the safe side, contact the IRS and make sure the agency received your payment.

In some cases, the IRS will request additional financial information before agreeing to reinstate your payment plan. You may have to fill out a new Form 433-D (Installment Agreement). In particular, the IRS will require you to submit this form if you have requested a change in the terms of your installment agreement.

How to Reinstate a Defaulted Tax Payment Plan

If you’re in a streamlined installment agreement and this is your first default in the last year, the IRS will typically reinstate your payment plan. You may have to pay a reinstatement fee, but generally, you won’t have to provide any additional financial details.

However, if you want to change the terms of your payment agreement due to financial hardship, the IRS will probably make you submit a new Form 433-D. The IRS often reinstates payment plans for people who need lower monthly payments or longer terms. The agency understands that taxpayers may need extra flexibility on their installment agreements if they lost their jobs, incurred extraordinary medical bills, or endured other hardships.

Reinstating Payment Plans After Incurring New Tax Liabilities

In situations where the installment agreement was terminated due to a new unpaid tax balance, the IRS may require that the unpaid balance be paid in full before reinstatement. In some cases, however, you may be able to roll the new balance into your existing payment arrangement.

What Happens After You Receive Notice CP523

This is the timeline that goes into effect after the IRS sends Notice CP523:

• 30 days — you must make your late payment or appeal the notice.
• 46 days — If you haven’t appealed or paid within 30 days, the IRS terminates your installment agreement the 46th day after the notice date.
• 76 days — You have 30 days after the termination to request an appeal of the termination.

The IRS doesn’t give much leeway on these deadlines. You may be able to get the plan reinstated after it has been terminated, but for best results, you should contact the IRS before the automatic termination takes place.

What if You Disagree with Notice CP523?

If you made your payment and the IRS didn’t receive it, call immediately with the proof that the payment was made. Also, send proof of payment to the address on the notice via certified mail.

For example, if you know that your monthly payment was withdrawn from your checking account and you don’t think the payment plan should be in default, you should send proof of payment. You could use a copy of your bank statement or ask your bank to send you something that details that payment.

How to Appeal the Termination of Your Installment Agreement

Notice CP523 should outline your right to appeal under the collection appeals program (CAP). The CAP is used to appeal numerous IRS collection activities. Note that you are appealing the termination of your installment agreement. You cannot use the CAP to appeal the amount of tax due.

What If You Can’t Afford Monthly Payments Now?

If you can no longer afford monthly payments, you need to proactively reach out to the IRS and make other arrangements. That will protect you from facing unwanted collection actions. Here are the main options to consider:

• Financially verified installment agreement – If you cannot afford your current payment, you may be able to lower your payment and stay on a monthly payment plan. However, you may need to provide the IRS with financial verification (aka a collection information statement). Then, the agency may give you lower payments or a longer payment term.
• Partial payment installment agreement – If you cannot make the minimum monthly payment on an installment agreement, the IRS may let you make lower payments through a PPIA. This works similarly to a settlement because when the tax debt reaches the collection expiration date, you no longer have to pay anything else.
• Currently not collectible – If you cannot afford anything, you prove that to the IRS with financial statements or other qualifying documents. Then, the agency stops all collection activity until your finances improves or the debt expires and disappears.

There are pros and cons to all of these options. Consider talking with a tax attorney for the best path in your situation. 

How to Avoid Going Into Default on Your IRS Payment Plan

Consider setting up direct debit on the day you get paid to ensure that the IRS can withdraw the monthly payment from your bank account on time and in full every month. If you have an inconsistent pay schedule and you prefer to pay manually, make sure that you sign in before the due date to make your payment online every month. If you don’t have enough cash on hand, you can pay with a credit card, but there is a fee to do so. 

To ensure mailed payments get credited correctly, send them with the payment voucher at least a week before the due date. Also, write your tax ID (Social Security number) and the type of tax and tax period (for example, income tax, 2023) on the memo line of your check or money order. If you can no longer afford monthly payments, contact the IRS to talk about other arrangements before they terminate your installment agreement. 

If you’re unsure of your options, contact a tax attorney for help. Otherwise, you can get help from the Taxpayer Advocate Service if you’re dealing with unexpected wait times or are unable to fix the problem through the IRS’s usual processes. Low-Income Taxpayer Clinics can also help if you owe under a certain threshold and have a relatively low income. 

FAQs About Notice CP523

How much do I need to pay?

Your CP523 notice should show the amount owed to cure default near the top of the notice, under your total amount due. For example, if you missed a monthly payment, this amount may be your missed and current month’s payments.

How should I pay the past due amount?

You can mail the payment with the voucher attached to the CP523, or you can sign into your IRS online account to make a payment.

Why is there a failure-to-pay penalty on my CP523?

The IRS assesses a failure-to-pay penalty of 0.25% while you are on an active payment plan. The penalty will increase to .5 to 1% if you go into default. 

Why is there so much interest on the CP523?

Interest accrues on your IRS tax debt starting the day it is due. Even if you are on a payment plan, interest will continue to accrue on your account at the Federal Rate plus three points. The interest shown on your CP523 notice should be the lifetime interest on the balance. 

Can the IRS levy my assets right away if I don’t respond?

The IRS can seize your tax refund if you don’t respond to Notice CP523. However, the agency must send you another notice that outlines your right to a Collection Due Process hearing before seizing your other assets or garnishing your wages.

Can the IRS take my passport if I don’t respond?

If you owe over the seriously delinquent threshold for the year and you default on your payment plan, the IRS may notify the State Department to rescind/deny your passport. As of 2025, the threshold is $65,000.

The IRS doesn’t have to notify you before taking this action so if you owe over that amount and want to protect your international travel privileges, you should make a payment arrangement before your IA gets terminated.

Will the IRS issue a tax lien?

If there is not currently a tax lien against you, the IRS may issue one if your payment plan is terminated. The IRS doesn’t have to send advance notice before taking this step.

What is IRS Notice CP523H?

If you’re on an installment agreement for a shared responsibility plan, the IRS may send you CP523H if you go into default. The options and consequences for not responding are the same as for the general CP523 notice.

Get Help with Notice CP523

If you have received Notice CP523 and you can afford to continue your installment agreement, simply make the payment and continue paying as usual. This is relatively easy to do on your own.

But if you want to negotiate a new payment arrangement, appeal the details in the notice, find other ways to handle your IRS tax liability or get help from a certified tax professional. The team at the W Tax Group can help you negotiate and deal with the IRS. To learn more contact us today.

Lead Tax Attorney at The W Tax Group

Stephen A Weisberg