IRS Notice CP523 (IRS Installment Agreement Default)

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

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?

Again Notice CP523 means that the IRS intends to terminate your existing installment agreement. The IRS sends this notice to taxpayers who have defaulted on their existing installment agreements.

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 failed to make your monthly payment due.
  • 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.

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 job, 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.

In late 2020, the IRS announced that it would automatically roll certain unpaid tax liabilities into existing installment agreements. This was part of the agency’s efforts to help taxpayers during COVID. This offer may not be available indefinitely.

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.

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.