January 25, 2017

Installment agreements with the IRS let taxpayers pay their outstanding tax debt in fixed monthly payments over a certain number of months or years. Once the agreement is made, the taxpayer is obliged to at least pay the minimum required amount every month. Taxpayers unable to pay the minimum amount are required to inform the IRS immediately.

The IRS issues a Notice CP523 – Intent to Terminate Your Installment Agreement via Certified Mail to taxpayers who have defaulted on their installment agreement and are in danger of losing this agreement.

You could receive this notice for one or more of the following actions which create a default:

  • You missed one or more previously agreed installment payments.
  • You incurred a new unpaid balance.
  • You did not file your tax return by the due date.

The Notice CP523 also tells you how the agency intends to collect your taxes owed if there is non-payment, which often includes either seizing your wages and/or bank accounts or filing a federal tax lien.

In order to avoid terminating your installment agreement, you must pay the due amount within 30 days of receiving the notice. Making a full monthly payment can remove the installment agreement from default status and keep the agreement intact. However, know that doing so will not reinstate the installment agreement automatically. The IRS usually needs to be contacted for reinstatement.

If all your installment agreement payments were made on time and paid in full or you disagree with the reason for terminating your installment agreement, contact the IRS to resolve the problem as soon as possible. Call the number indicated on the notice to have the installment agreement reinstated, or ask a tax professional to call on your behalf.

If you are unable to pay the required amount, contact the IRS as soon as possible to see if you can arrange for a different installment agreement or get the agreement reinstated.

The CP523 acts as your final notice to take action, and so your underlying installment agreement has not yet been terminated. Instead, your installment agreement has entered a period of default, which to a certain extent, can still be alleviated.

If you do not respond to the CP523 within 30 days, your installment agreement will be cancelled or terminated on the dated indicated on the notice. The next notice issued by the IRS will merely inform you of your options. As a taxpayer, you are given the right to appeal an IRS decision—even after the installment agreement has been officially terminated.

Note that getting your installment agreement reinstated comes with a fee. If the agreement goes into default and is not reestablished, the IRS will continue to charge interest and penalties on the due balance.

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