IRS Notice CP 523 is the letter you get from the IRS when you default on an IRS payment plan. This notice spells out your payment plan is in default and that the IRS may end it if you fail to act within 30 days. After thirty days they can seize your wages and property which will not be difficult for them to find since you likely disclosed the information to them when you initially set up the installment agreement. It also cautions you that the IRS may file a tax lien and can start to levy assets such as a state refund after approximately 90 days if you take no action. The IRS sends this notice through certified mail to those living in the United States, and if you live out of the country, it comes via registered mail. The reason why the agreement has defaulted may be vague but it is usually because you missed a payment or owe other taxes. It could also be because you have unfiled tax returns or your payment to the IRS was not approved. Notice CP523 for Individuals is practically the same as Letter 2975 sent to Businesses.
When Do People Receive Notice CP 523?
If the monthly payment doesn’t go through or if your check isn’t approved, the IRS considers that to be a payment plan default. An IRS installment agreement default may also happen in other cases. Namely, if you don’t provide financial information as requested or if the IRS discovers that you provided incorrect information when applying for your payment plan, you may be in default. Additionally, if you obtain a new balance, or do not succeed in filing a tax return, your payment plan can also be terminated. Finally, if you fail to make needed estimated tax deposits or estimated tax payments, this can lead to default as well. Swift action will be necessary to avoid levies. The IRS will not send any more letters and won’t tell you when they will seize your property. Usually, you must complete Form 433-A, or Form 433F to reveal your income & assets.
What to do If You Receive Notice CP 523
If you receive Notice CP 523, you should try to make a payment before the termination date or payment deadline stated on the notice. That can help to get your installment plan back in good standing in many cases. It is always best to call the IRS to verify the reinstatement and not just send payment.
If the IRS mistakenly terminated your payment agreement, or you do not concur with the amount due, contact the IRS at the number on the top of the letter.
When a new balance adds up, it will automatically lead to a payment plan default. If you receive a default because of a new balance you cannot pay, call the IRS or contact a tax professional to see if he or she can reorganize the new balance into a new monthly payment plan. You may have to fill out a 433-F for the IRS in most cases, which is a financial statement.
If you are not capable of resolving the situation by calling the IRS directly, you can request a CAP (Collections Appeals Program) to challenge the termination of the Installment Agreement. Remember the CP-523 notice warns and provides the date of termination if you fail to pay. Once that date arrives, you have 30 days to request a CAP Appeal.
What Happens After You Receive Notice CP 523?
After the IRS issues Notice CP 523, the following timeline kicks into outcome:
- If you don’t make a payment or contact the IRS by the date shown on the notice, the IRS may terminate the payment plan 30 days after the date printed on the notice.
- After the IRS issues the notice, you have 45 days to appeal a defaulted agreement.
- After the IRS issues the notice, you have 76 days from the notice of intent to terminate the IA to appeal, but you have to wait until the agreement terminates.
If you don’t reply to IRS Notice CP 523 within 13 weeks, which is basically 90 days, the IRS changes the status of your account. At that position, the failure-to-pay penalty rate increases, and the IRS will be able to file a federal tax lien. Then, the IRS may seize assets like a state tax refund. To prevent that, contact the IRS or have a tax professional restore your payment plan as soon as you receive the notice of your IRS payment plan default.
In some situation, the IRS may not wait to issue the levy and start seizing assets. If they have sent you a notice of your appeal rights in the past about the levy, then a levy could include funds in your bank account or your wages. The IRS can also begin the levy right away if it feels tax collection is at risk.
How to Get the Installment Agreement Re-establish after Receiving IRS Notice CP 523
To re-establish your payment plan, you need to reach out to the IRS directly or get a tax professional to do it on your behalf. Usually, you have to provide some additional financial details to the IRS, and the representative may have to get endorsement from their manager to re-establish the agreement. The agent may ask why you defaulted and how you are going to avoid default in the future.
They may also request some details about your assets, and you may even be needed to fill out a new form 433-D (Installment Agreement). That’s a short one-page form. Finally, the IRS may require you to set up direct debit payments or payroll deductions. That just makes the new payment arrangement more secure.
However, if you are in a streamlined payment agreement and this is your first failure to pay in 12 months, you may not have to provide any extra financial details to get the payment plan reinstated. Keep in mind that you may have to pay a reinstatement fee of $50.
If the IRS terminates your agreement as a result of new unpaid tax liabilities, you may have to pay those amounts before you can restart your payment plan. However, usually, if the new tax debt is equal to less than two monthly payments on your existing payment plan, you can roll the debt into your payment plan. In this situation, you can also get your payment plan reinstated without giving any additional financial details to the IRS.
Get Assistance Responding to Notice CP 523
To get assistance after receiving CP 523, fill out the form at the top of the page and speak to a reputable tax firm today. Have a qualified tax professional work out a resolution with the IRS on your behalf.