Although receiving a notice from the IRS is rarely a cause for celebration, CP523 is especially worrying. Sent by certified mail, it puts you on notice that you have defaulted on an earlier installment agreement and are now at risk for enforced collection actions like wage garnishment, a bank levy, and even asset seizure.
Why Did You Receive a CP523?
There are many reasons why the IRS will send you a Notice CP523, the most obvious of which is a failure to pay the monthly amount specified in the installment agreement. Other reasons include:
- Not submitting updated financial information when the IRS asks you for it
- Not paying the full amount of tax due on your most recently filed return
- Failing to make your required estimated tax payments
- Not responding to a Notice CP521, which is sent when at least one payment has been missed on an installment agreement.
If you receive Notice CP523, it is imperative that you take action now. Your IRS installment agreement was put into default status, but the IRS will not terminate it and commence collection actions until 30 days after the date printed on the IRS notice. Below is an overview of measures you can take to address the situation before the deadline is reached and there’s an IRS installment agreement default.
Remedy The Default
You have 30 days from the date on the CP523 notice to cure the default before the agreement goes into termination status. For example, if you weren’t able to pay your income taxes in full by April 15 and accrued additional unpaid tax liabilities, you could pay any outstanding balance within that 30-day period and prevent your installment agreement from being terminated. After curing whatever default triggered the Notice CP523, be sure to contact the IRS and advise them, as it may not automatically reinstate your installment agreement.
The payment agreement could be in default because you missed your monthly payment or you didn’t file a tax return. If that’s the case and the IRS intends to terminate the installment agreement, you should file the tax return and make up the monthly payments that were missed.
Appeal The Agreement Termination
You have the right to request a Collection Appeals Program (CAP) appeal, which will review the reason for the intended termination and request reinstatement. The CAP program can be used to appeal a wide range of collection actions, including the rejection, modification, and termination of an installment agreement.
A CAP appeal is different from a Collection Due Process (CDP) hearing in that you cannot appeal the decision in a U.S. Tax Court. This is one of the reasons why you should retain an experienced tax attorney who can give your appeal the best chance of succeeding.
Investigate Better Solutions
Perhaps you received IRS Notice CP523 and defaulted on your installment agreement because your financial circumstances have changed and you are no longer able to afford the payments. In this case, you could contact a New Jersey tax attorney for assistance with alternative strategies, such as:
- Amended payment plans: If you cannot afford your installment payments, your attorney may be able to negotiate on your behalf and persuade the IRS to amend the payment plan or reduce your tax liability. There are different types of payment plans or installment agreements available, and you should know all your options before the IRS terminates your installment agreement.
- Offer in Compromise: An Offer in Compromise, or OIC, settles your tax liability for less than the full amount owed. If you are current on your tax returns and estimated tax payments and the amount you offer meets or exceeds your reasonable collection potential, your OIC stands a reasonable chance of being accepted.
- Currently non-collectible (CNC) status: If you can’t afford to be on an installment agreement without creating a financial hardship for your family and you have no assets with sufficient equity to pay your tax debt, you could qualify for CNC status. This may be an appropriate solution if your difficulties are temporary (e.g. due to job loss). If you know you won’t ever be able to fully pay, an OIC is a better option.
After reviewing your financial situation, your attorney will help you pursue the option that is most likely to overcome your tax issues.
What If You Ignore the CP523 Notice?
Ignoring the CP523 notice is not recommended. If they haven’t already, the IRS could file a federal tax lien after the termination date. They could also seize assets to satisfy the tax debt and levy your bank accounts. As mentioned earlier, the IRS offers payment plans so all this can be avoided so long as you enter into a new payment arrangement before they formally terminate your installment agreement. By providing additional financial details, you may even be able to get the installment agreement reinstated or get on an even better payment plan.
If you recently received a Notice CP523, the time to speak with an attorney is now. At Paladini Law, we have helped clients throughout New Jersey find the right solution to their problems with the IRS, has represented taxpayers at CAP appeals, and if their original installment agreement became unsustainable, recommended appropriate alternatives. To schedule a confidential case review, please call 201-748-2401.
CP523 Notice FAQs
What if I can no longer afford my monthly payment?
If you can no longer afford your monthly payment and need to resolve an unpaid balance, you can set up a new payment plan. The IRS considers changes in circumstances, so if your current installment agreement is no longer feasible, you can renegotiate the payment plan and pay less than you were paying before. You can call the toll free number on the IRS notice.
I had back taxes and filed a return with a new balance. What are my options?
If you were on an IRS installment agreement and filed a return with a new balance, the IRS will likely send an intent to terminate notice. Ideally, you’d pay the new balance in full, but assuming you can’t, you could still set up a new IRS installment agreement that includes the new balance. You’ll likely need to file a new form, such as Form 433d. You may need to update your financial information on Form 433f. You’ll need information about your assets and your bank account, as well as other financial information. You may also need to pay a reinstatement fee.
When will the IRS begin proceedings against me?
The IRS doesn’t necessarily “begin proceedings,” but if you don’t take action by the due date, the IRS will try to collect the back taxes. This could mean that the IRS sends a letter to your bank in order to seize the money in there. That’s why it’s so important for taxpayers to take immediate action in response to anything they receive from the IRS by registered mail. Ignoring it will make the IRS intent on taking collection action.
Will the IRS seize my assets if I don’t make my payment when I’m on a payment plan?
If you’re receiving an IRS CP523 notice, it means your installment agreement may default. Taxpayers on IRS installment agreements that may default could be subject to collection action. That’s why it’s important to either contact the IRS to resolve the tax issues or contact tax pros to handle for you.
Speak with a New Jersey Tax Attorney
If you recently received a Notice CP523, the time to speak with an attorney is now. At Paladini Law, we have helped clients throughout New Jersey find the right solution to their problems with the IRS. Attorney Brad Paladini has represented taxpayers at CAP appeals and, if their original installment agreement became unsustainable, recommended appropriate alternatives. To schedule a confidential case review, please call 201-748-2401 or complete our online form.