Saving Your IRS Payment Plan: IRS CP523 Guide

Man receives IRS Payment Plan CP523

CP523 (Intent to Terminate Installment Agreement and Seize Your Assets)

If you don’t pay your taxes, the IRS will send you all kinds of collection notices. This can be very stressful, and the best way to get the notices to stop is to set up a payment arrangement. Unfortunately, however, if you default on your payment arrangement, you will start to receive more collection notices.

When you first default on an installment agreement, the IRS will send Notice CP523. This notice alerts you that your agreement is about to be terminated, but you can avoid termination by taking action. If you find yourself in this position, read on to learn more about the steps you can take to regain control over your tax issue.

What is Notice CP523?

Notice CP523, also known as “Notice of Intent to Terminate your Installment Agreement” and “Notice of Intent to Levy,” notifies you that the IRS plans to end your installment agreement. In some situations, the agency may try to seize your assets if you don’t get your tax debt squared away.

At this point, you can still get back into good standing and keep your payment plan active, but you must act quickly. If you don’t make arrangements, the IRS could seize tax refunds, take away your passport, freeze the funds in your bank account, and seize your assets.

Why Did the IRS Send Me Notice CP523?

The IRS sent this notice because you have defaulted on one of the terms of your payment agreement. This usually happens because you missed a monthly payment or incurred a new tax debt. You may also receive the notice if you don’t file a tax return, fail to make estimated quarterly tax payments or break other terms of the agreement. The IRS also sends this notice if it discovers that you provided false information when applying for the installment agreement.

What to Do if You Receive CP523

If you want to keep your installment agreement active, you must quickly address the reason for default. Generally, you get 30 days from the date the notice was sent, but always check the deadline on your notice to be sure.

For example, if the CP523 says that your plan fell into default because you incurred a new tax debt, pay that bill in full, and then contact the IRS to ensure your payment plan is still active. If you received CP523 after missing a monthly payment, pay that amount and then continue your installment agreement as usual.

If you’re unable to pay your new tax debt, catch up on monthly payments, or take other recommended actions, you should contact a tax attorney. They will know the ins and outs of working with the IRS and be able to help you get the best resolution for your situation.

How to Appeal an Installment Agreement Termination

Luckily, you can appeal the IRS’s decision to terminate your agreement by making a request through the Collection Appeals Program (CAP). If the CP523 doesn’t outline how to appeal, then just contact the IRS directly. Usually, with the CAP, you will appeal to the supervisor of the IRS employee handling your case. Then, if you disagree with their decision, you can request an appeal.

During the appeal, you will be able to explain why you disagree with the termination and be able to suggest alternatives. However, you need to move forward very carefully. You cannot appeal a CAP decision in Tax Court. To be on the safe side, you may want to work with a tax professional.

What if You Ignore Notice CP523

If you ignore Notice CP523, the IRS will move forward with terminating your installment agreement. Then, your tax debt will be due in full, and the IRS can try to enforce collection actions.

The agency will issue a federal tax lien if one is not already in place — this gives the IRS a legal right to the proceeds of any assets you sell (up to the amount of the tax debt plus interest, fees, and collection costs). A lien also makes taking out loans against your assets nearly impossible.

If you don’t pay, the IRS may also garnish your wages, take the funds in your bank accounts, or seize other assets. The agency has the power to take nearly anything, including your home, in some situations. That’s why it’s so critical not to get behind.

Dealing With Tax Debt After Installment Agreement Termination

If your installment agreement is terminated, you will owe the IRS the balance in full immediately. Your options for tax relief depend on the situation, but here are some of the possibilities:

  • Apply for a new installment agreement — The IRS may not approve your application based on your recent termination, and if they do, you will have to set up direct debit payments with Form 433-D or payroll deductions.
  • Consider an offer in compromise — If you can prove that you can’t afford to pay, you may be able to get a settlement. Keep in mind that almost half of OIC applications are denied, so working with a tax professional will yield the best chances of a successful application.
  • Look into a partial payment installment agreement — This is when you make small monthly payments, and when you get to the end of the collection statute period, the IRS waives the remaining amount of debt. This can save you money, but you must submit many financial details.
  • Request currently not collectible status — If you get CNC status, the IRS will not pursue any collections against you until your financial situation improves.

Depending on the situation, alternatives such as innocent spouse relief or an offer in compromise based on equitable tax administration may be other alternatives to consider.

Is Notice CP523 Common?

If you’ve received this notice, you are not alone. Many people on IRS payment plans go into default, and the most common reason for default is incurring new tax debt. The reason payment plans have such high default rates is debatable, but one possibility is that people set up payment plans that they can’t afford because they don’t work with tax professionals.

In fact, an independent analysis of IRS tax debt resolution programs indicates that almost a quarter of people on monthly payment plans could have qualified for an offer in compromise or a partial payment installment agreement instead. The best way to avoid this situation and to ensure the best possible outcome for your unique tax issue is to consult a tax expert when you receive a CP523 notice.

Get Help With Notice CP523

At Wiggam Law, we have extensive experience helping people with IRS and state tax debt. Have you just received Notice CP523? Are you worried about going into default on your payment plan? Need help dealing with the IRS? Then, call us at (404) 233-9800 or fill out our online form to schedule a consultation, and we can take the first steps towards a solution together.