The IRS sends CP523 Notice to inform taxpayers that they have defaulted on their Installment Agreement. Non-payment of the monthly payment will lead to termination of the agreement. Upon termination of the installment plan, the IRS can proceed with collection activity; this may include a tax lien, or seizing of funds from the taxpayer’s wages and/or bank accounts.
Installment Agreement Rules
Installment Agreements allow taxpayers to pay their tax debt in fixed monthly installments over a period of months or years. Depending upon the amount of the tax debt and the taxpayer’s ability to pay, the amount to be paid each month will vary. After the agreement is made, the taxpayer is required to at least pay the minimum required amount each month. If the taxpayer cannot pay the minimum amount, even for only one month, they must immediately inform the IRS.
What the Notice Includes
CP523 Notice contains the amount due, which needs to be paid immediately to prevent termination of the agreement. It also includes:
- The notice number and date
- The taxpayer’s social security number
- The IRS phone number
- The tax year for which taxes are due
- The failure to pay penalty
- Interest charges
- The total amount due
Taxpayers typically have 30 days from the date of the notice to respond, though are encouraged to reply as quickly as possible.
How to Respond
You can pay the minimum amount before the final due date and prevent your agreement from being terminated. If you cannot pay the required amount, you will need to immediately contact the IRS to see if you can get the agreement reinstated or arrange for a different agreement.
There is a reinstatement fee for getting your agreement reestablished. When an agreement goes into default and is not reinstated, the IRS continues to charge penalties and interest on the balance due. Additionally, they can initiate collection actions such as a lien or levy to recover the unpaid taxes.
If you make payment by check or money order, you may make it payable to the United States Treasury. Include your social security number, the tax year, and the form number with the payment.