After you have qualified for an Installment Agreement, you must fulfill all its requirements to resolve your tax debt successfully. When a taxpayer defaults on an agreement, the IRS terminates the agreement and begins collection actions if resolution is not sought.
Notice CP523 to inform the taxpayer about the IRS’ intent to terminate the Installment Agreement and seize the taxpayer’s property and/or assets to fulfill the tax debt. Usually, it happens when the taxpayer does not pay one or more installments under an Installment Agreement.
It is important to respond to this notice, as the IRS will proceed to place the levy (seizure) if they do not receive a satisfactory response. The IRS may seize any property and/or asset, which can include the levying of wages or bank account(s) to fulfill the tax debt, if the taxpayer does not make efforts to qualify for a payment plan, get the terminated agreement reinstated, or pays the full tax debt amount.
To avoid getting into such a difficulty, before applying for a payment plan, make sure that you can fulfill all its resolution requirements. It is better to choose a payment plan through which you can comfortably resolve your problems than a plan that you may be forced to default on. You will need to provide the IRS with a convincing reason of why you defaulted on the agreement. The IRS may or may not accept to reinstate the agreement.
If you did not pay an installment under the Installment Agreement and you pay it immediately after receiving IRS Notice CP523, the IRS may reinstate your agreement. The IRS charges a fee to reinstate a terminated agreement.