What to Do If You Receive IRS Notice CP523

If you’ve received IRS Notice CP523, you have likely defaulted on your monthly payment agreement. The CP523 IRS Notice tells you that your payment is overdue and that the IRS has the intent to terminate the installment agreement if you don’t pay within 30 days. 

This notice can be alarming, as the IRS also states they could levy — or seize — your property if you don’t respond. Don’t panic. You have a few options if you can’t pay the minimum to keep your agreement intact. This article walks through what this notice means for you and what actions you need to take immediately when you get IRS Notice CP523.

What Is an IRS Notice CP523?

The IRS Notice CP523 is the IRS’s Notice of intent to levy and intent to terminate your installment agreement. The IRS is alerting you that the monthly installment payment you sent is past due or that your direct debit payment didn’t go through. The CP523H notice is similar but may be related to your healthcare tax liability.

You have 30 days from the date of the notice to make the past-due payments, as well as any penalties and interest charges included on the notice. The notice outlines the exact amount you must pay within 30 days to avoid agreement default. If you don’t do anything within those 30 days, the IRS will terminate your agreement and pursue levy collection actions. 

Look for the line on the first page of the notice that says, “Past Due Amount Due Immediately (to prevent default of your Installment Agreement).” This is usually a much lower amount than your full tax bill, so if possible, you should pay this right away to avoid default and tax levies. Paying this amount will ensure your installment agreement is still in effect.

Note that above this line is the “Total amount due if we terminate your installment agreement and you exhaust your appeal rights.” This amount is what you will have to pay the IRS if you default on your agreement. This is your full balance, including the taxes you owe, penalties, and interest.

When Will the IRS Levy My Property?

With this notice, the IRS is letting you know that you’re overdue, that you owe an additional penalty for failing to pay on time, and that they will levy your property if you don’t act soon. But when? If you don’t respond to the notice within 30 days, the IRS will generally send you another notice called a Final Notice of Intent to Levy and Your Right to a Hearing. That gives you an additional 30 days, and then, the IRS can start seizing your assets. 

They may levy assets such as:

• State income tax refund
• Property, such as real estate or vehicles
• Wages or other income, such as Social Security benefits
• Bank accounts
• Business assets

Needless to say, you don’t want the issue to get to this point. You don’t want the IRS coming after your property and assets just to pay your tax bill. The IRS may also, at this point, file a federal tax lien that indicates their intent to seize your property, which is a public record that could impact your ability to get credit approval.

So, what can you do to avoid contract termination and an IRS levy on your assets?

Steps to Take After Receiving a CP523 IRS Notice

The best thing you can do when you receive a CP523 Notice is to act immediately. The IRS gives you 30 days to respond before they cancel your installment agreement, and they could then levy your property. Here are steps to take to resolve your issue quickly:

Read the Notice Thoroughly

Many taxpayers ignore IRS notices, thinking the issue will go away or they don’t have to respond. Notice CP523, however, requires careful attention and reading so you can take action right away. Read through your notice carefully, including the amount you owe now, your total tax bill, and any penalties the IRS has added to your account. Read through all your options and the instructions contained in the rest of the notice.

Pay the Past Due Amount

To avoid a levy, the easiest thing to do is pay the minimum payment noted on your CP523 Notice, which will include any failure-to-file penalties and the interest you’ve accumulated. The notice provides specific instructions to send in your payment to the IRS, whether via mail or online at irs.gov/payments. Remember to do this within 30 days from the date on the notice to avoid installment agreement termination.

Avoid Agreement Default

You want to avoid installment agreement default at all costs. If the IRS terminates your agreement, you can no longer pay the monthly amount you agreed to previously. You’ll be on the hook for your full tax balance once again, and the IRS can come after your property to cover it. You also have to deal with additional penalties for failing to pay if you don’t act fast with a CP523 Notice.

Tell the IRS You Can’t Pay

Even if everything is correct on your notice, you may be having trouble paying the amount that’s past due. If this is the case, it’s still best to reach out to the IRS. The agency says to give them a call at the provided CP523 Notice phone number, and they may agree to restructure your installment agreement based on your financial situation. You may be subject to an additional user or restructuring fee, but you can stay in good standing with the IRS this way.

Contact the IRS if You Don’t Agree

The IRS says that if you disagree with the amount shown on the CP523 Notice, you can call the agency to talk through what’s included and why. An IRS representative should be able to explain it to you. However, you never know who you’ll be talking to at the IRS. It may be better to first contact a tax professional who can answer your questions on a more personal level.

Request an Appeal

You also have the right to appeal if you don’t agree with the information on the CP523 Notice. Your notice will include instructions for requesting an appeal with the IRS Office of Appeals. You can either call this office at the phone number provided or send in Form 9423, Collection Appeals Request, to the IRS address provided on your notice. 

Pursue an Offer in Compromise

Another option is an offer in compromise, which could allow you to settle your debt for less than you owe. You would send the IRS a payment offer that you can afford, and they may or may not accept this offer based on your ability to pay and whether they believe that’s all they can expect to collect from you. This can be a good option if you’re dealing with a financial issue and can’t pay the minimum required balance. Usually, you can only qualify if you have limited income and assets.

Ask for Penalty Relief

Because CP523 will include additional penalties on your account for failing to make your payment, you may be wondering if you can reduce or remove those penalties. If you’re dealing with a financial hardship, such as the death of a family member, a serious illness, or a natural disaster, the IRS could agree to remove or reduce your penalty. 

Send in a signed statement that explains your situation, and be specific about which penalties you want the IRS to remove. You could also qualify for first-time penalty abatement if you have an otherwise good history of tax compliance from the last few years.

If the IRS gave you bad advice, and you were penalized because of that advice, you can also let them know. This happens if you:

• Wrote to the IRS for advice on a tax issue
• Provided them with the right information
• Received written guidance from them
• Used that advice and were penalized because of it

If this happened to you, send in Form 843, Claim for Refund and Request for Abatement, to let them know. 

Work with a Tax Expert

It can be pretty serious when the IRS is threatening to levy your property or terminate your installment agreement. If you believe there’s a mistake on the notice, you’re not able to pay the balance, or you want to contact the IRS about other options, it’s always better to talk to a tax professional first. An expert will get to know your specific situation and advise you on the best way forward based on tax law and your rights as a taxpayer.

Consequences of Installment Agreement Default

CP523 is one of the more urgent notices you can receive from the IRS. You don’t want to default on the agreement you previously set up with the agency to get your debt paid off. 

Let’s review everything that could happen if the IRS terminates your installment agreement:

• The IRS no longer agrees to accept your monthly payment to stay in good standing for your tax liability.
• You will be on the hook for your full tax balance, not just the monthly payment.
• You will face additional penalties and building interest for not paying on time.
• The IRS will begin collection actions:
  • Filing a federal tax lien, which is public record
  • Levying, or seizing, your assets and property
• You may eventually face criminal charges for crimes such as tax evasion, if you are found to have willfully avoided paying taxes or misrepresenting your information.

Remember that ignoring your tax obligations only leads to a bigger tax balance in the end. And, you will likely have to deal with legal issues and headaches to get everything resolved. 

Get Tax Help from a Tax Attorney

Receiving an IRS Notice CP523 can be stressful, and the process for resolution is often complex. However, remember that you have options. You can contact the IRS to file an appeal if you don’t agree with the information on the notice. You can pay immediately to get your agreement reinstated. Or you can show the IRS that you’re dealing with financial issues and can’t afford your payment. 

Whatever your situation is, work with a tax attorney as soon as you receive Notice CP523 in the mail. An experienced tax professional understands the complicated ins and outs of tax law. They can look at your situation, evaluate your balance and history, and help you pursue the right way forward toward tax resolution. 

The team at Damien’s Law is here to help with CP523 notices. Contact our team today to set up a consultation and get expert assistance with your installment agreement issue.