What to Do After Receiving an IRS CP523 Notice

November 7, 2023 | Payment Plans | Tax Debt

Taxpayers’ Guide to the IRS CP523 Notice

How to Deal With a Terminated IRS Installment Agreement Dealing with the Internal Revenue Service is enough to cause even the calmest person to worry, and panic is nearly guaranteed when you receive certified mail from the IRS. This is especially true if you get a CP523 notice. This letter says that the IRS is terminating your installment agreement, and you must pay in full now.   Although this letter may feel threatening, you don’t need to panic yet. The IRS is planning to terminate your installment agreement, but you still have time to make amends and get back on track.   Keep reading to learn more about how the default may have occurred, your immediate next steps, repayment options, and what happens if you either fail to respond or cannot make your payments. Or contact us at the Timothy S. Hart Law Group, PC for help today.

Why You Received the IRS CP523 Notice

The IRS sends this letter to people who have defaulted on their installment agreements (monthly payment plans). You may have defaulted because you did one of the following:  
  • Missed one or more monthly payments.
  • Failed to file a tax return on time.
  • Didn’t pay estimated tax as scheduled.
  • Accrued a new unpaid tax debt when you filed your return.
  • Did not respond to an IRS request to provide updated financial information.

When you take out an installment agreement, you sign a form saying that you agree to these terms. You also agree that the IRS can terminate your installment agreement if you break these rules.

Unfortunately, a significant number of people default on installment agreements, and the main reason is because of incurring new tax debt. Depending on the situation, you may be able to convince the IRS to let you roll the new debt into your existing payment plan, but it’s definitely not guaranteed. For best results, contact the agency as soon as possible (hopefully before you receive CP523) and request to modify your payment plan.

Your Next Steps After Receiving a Notice

No matter how nervous you are, this is not something to put to the side to deal with later. You only have 30 days to remedy the situation, and if you don’t respond on time, you risk having the IRS take action against you. To protect yourself, check out these tips:  
  • Read the notice carefully. It will tell you why you’ve received it, how much you owe, and what the IRS plans to do next if you do not respond to the notice.
  • Call the IRS. The CP523 notice phone number is in the upper right corner of the notice. The IRS will tell you exactly what you need to do to make your account current and avoid the termination of your installment agreement. They can also address concerns you may have if you don’t believe you have violated the terms of your repayment plan.
  • Provide updated information to the IRS. If you received this notice because you did not provide financial information upon request, you may be able to update your information and keep your installment agreement in place.
  • Make required payments to bring your account up to date. If you are behind on payments, the letter should tell you how much you need to pay to avoid further action. If your bank returned the payment or denied the automatic withdrawal, this may be as simple as making the payment and ensuring that you keep enough money in your account for future automatic withdrawals.

Consequences of Failing to Respond

You may wonder what happens after a CP523 notice if you ignore it or wait too long to address it. If you look at your CP523 notice, it explains exactly what will happen if you do not take corrective action or contact the IRS to discuss your options.   If you don’t reach out to them, your installment agreement will be terminated 30 days after the date on which the notice was sent. At that point, the entire amount included in the installment agreement will be due immediately, including interest and penalties.   Assuming that you cannot pay the entire amount immediately, the IRS will seize your state and federal income tax refunds. The IRS can also seize your property and use the proceeds to reduce the amount you owe. You have appeal rights, but once you have exhausted those, the IRS will move forward with seizing your assets including income, funds in bank accounts, business assets, your car, your home, and Social Security benefits.

Options for Repayment

The notice itself has information about how much you must pay immediately to avoid termination. The amount you owe may include interest charges and a failure-to-pay penalty.   If you can pay the amount listed, you can pay by check or money order, by bank account online, or by debit or credit card online for a small fee. The IRS website provides more detailed information on payment options. Many payers find online payments to be the most convenient option since they provide immediate confirmation of payment for your peace of mind.   Upon making the payment required to prevent termination of your installment agreement, you should still call the IRS after your payment has been received but before the end of the 30-day grace period. Verify that your payment has been received and that your installment agreement has been reinstated.

What If You Can’t Afford Payments?

Avoiding cancellation of your installment agreement is easy if you have the funds available to make your account current. But what happens if you are unable to pay the amount currently due or continue making your monthly payments?   There are options available to taxpayers who are experiencing financial hardship, but it often takes some time to apply for these options, so it’s important to start exploring your options as soon as you receive your CP523 notice. Here are some alternatives to traditional IRS installment agreements:  
  • Currently-not-collectible — You may ask the IRS for a temporary delay by proving that your financial situation is so dire that you cannot both make payments and pay your basic living expenses. If you can prove that, the IRS will place your account in “Currently Not Collectible” status. They will want proof of your current financial situation, so be ready to provide paystubs, bank account statements, and other relevant documentation. The IRS does not levy your assets or income when you are in Currently Not Collectible status, but they may still keep your tax refunds and apply them to your debt. They may also apply penalty charges and interest to your balance.
  • Offer in compromise — Another option to explore is an offer in compromise. If the IRS accepts your offer, you can settle your tax debt for less than what you actually owe. You can choose to pay in full or use a periodic payment plan. However, not everyone qualifies for an offer in compromise. The IRS provides an Offer in Compromise Pre-Qualifier Tool that you can use to find out if this is a viable option for you.
  • Partial payment installment agreement — Perhaps your financial situation has changed and you cannot make your agreed-upon payments anymore, but you can make smaller payments toward your balance. The IRS may be willing to work with you to reduce your monthly payments in line with your current ability to pay. Before they approve a change like this, they will likely ask for proof of how your financial situation has changed.

If you are in a complicated situation and don’t know what financial options are available to you, taking any action is better than waiting out the 30-day clock. Perhaps you are on an installment agreement but have new unpaid taxes that you cannot afford to pay, or maybe you are suffering temporary financial setbacks due to providing medical care for a loved one or going on medical leave.

How to Appeal Notice CP523

If you do not think your installment agreement should be terminated because the IRS made a mistake, look into requesting a Collection Appeals Program appeal. After you file Form 9423, the IRS will review the decision to terminate and determine whether or not your agreement should be reinstated.

How to Reinstate a Terminated Installment Agreement

The IRS may not reinstate your installment agreement, but you can request reinstatement. The sooner you make the request, the better. To convince the IRS to let you make monthly payments, you may need to submit a financial statement. You may also need to set up direct debit payments.

How an Attorney Can Help

The team at Timothy S. Hart Law Group, P.C. is committed to helping taxpayers like you avoid unnecessary financial setbacks and legal issues. If the IRS threatens to terminate your installment agreement, you have options, but you need to ensure that you pick a choice that keeps you financially secure.   Remember, the IRS is determined to collect what you owe, and they will only agree to accept less or decrease your payment amount if you provide compelling proof that it’s necessary. Our team will help you get the documentation and evidence you need to make a strong case to the IRS.   If you have a complicated situation, such as additional unpaid taxes you want to roll over into your installment agreement or missed estimated tax payments that complicate your current installment agreement, you’ll likely have to fill out multiple IRS forms to cover your bases and avoid additional penalties or fines. We’ll ensure that you meet all of your deadlines, submit the necessary paperwork and documentation, and follow up with any additional requests for information.   We understand that situations involving the IRS can be incredibly stressful, and we’re here to work with you closely every step of the way.

Panicking About a CP523 Notice? Contact Us Today

When you’re facing tax issues, Timothy S. Hart Law Group, P.C. is the right choice for you. Timothy S. Hart is both a tax lawyer licensed in New York and a Certified Public Accountant. With his in-depth understanding of IRS laws and regulations, he’ll find a solution that fits your financial needs. Set up a consultation now to explore your options after a CP523 notice—reach out online or call 800-714-7592.  

Attorney Timothy Hart

Timothy S Hart, the founding partner of the tax law firm of Timothy S. Hart Law Group, P.C. is both a New York Tax Lawyer & Certified Public Accountant. His area of expertise includes innovative solutions to solve your Internal Revenue Service and New York State tax problems, including tax settlements through the Federal and New York State offer in compromise programs, filing unfiled tax returns, voluntary disclosures, tax audits, and criminal investigations. [ Attorney Bio ]