Although receiving a notice from the IRS is rarely 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 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 notice. Below is an overview of measures you can take to address the situation before the deadline is reached.
Remedy The Default
You have 30 days from the date on the 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, 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.
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 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 plan: 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.
- 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 pay 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.
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 problem 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 201-381-4472 or complete our online form.
