IRS Notice CP523: Intent to Terminate Installment Agreement

IRS Notice CP523 warns that your installment agreement is in default and will be terminated within 30 days unless you take action to fix it.

What CP523 Means

If you had an active installment agreement (payment plan) with the IRS and missed one or more payments — or violated another condition of the agreement — the IRS sends CP523 to notify you that your agreement is at risk of being cancelled. An installment agreement is a contract, and the IRS takes defaults seriously.

If your agreement is terminated, all protections it provided disappear: the IRS can immediately begin levying your wages, bank accounts, and other assets to collect the full outstanding balance. You also lose the benefit of the reduced failure-to-pay penalty rate (0.25% per month) that applies while an agreement is in effect.

Common reasons for a CP523 default: a missed payment, a returned payment (insufficient funds), filing a new tax return with a balance you didn’t pay, or failing to file a required return.

Why You Received This Notice

You received CP523 because:

• You missed one or more scheduled installment payments
• A payment was returned due to insufficient funds or a closed bank account
• You incurred a new tax liability without paying it in full or including it in your agreement
• You failed to file a required tax return while the agreement was active

Key Deadline and Consequences of Ignoring

You have 30 days from the notice date to cure the default. If you do not act within 30 days:

• Your installment agreement is officially terminated
• The IRS can immediately issue a Notice of Federal Tax Lien if not already filed
• The IRS can begin levy action — wages, bank accounts, and other assets can be seized
• You lose the reduced 0.25% monthly penalty rate and revert to the standard 0.5% rate
• You must reapply for a new agreement, and the IRS may require stricter terms or additional financial disclosures

What to Do — Step by Step

1. Make your missed payment immediately. If the default was due to a missed or returned payment, catching up quickly is the fastest path to reinstating your agreement.
2. Call the IRS. Use the phone number on CP523 to explain what happened and request reinstatement of your agreement. The IRS often reinstates agreements for taxpayers who have a generally good payment history.
3. File any missing returns. If the default was caused by failing to file a required return, file it immediately and include payment for any new balance if possible.
4. Request reinstatement in writing if needed. If you cannot reach the IRS by phone, write a letter explaining the cause of default and your intention to cure it.
5. Apply for a new agreement if reinstatement is denied. File Form 9465 or use the IRS Online Payment Agreement tool to apply for a new installment agreement. Note that a user fee applies, and the IRS may require updated financial disclosure.
6. Set up automatic payments. To avoid future defaults, consider setting up a Direct Debit Installment Agreement (DDIA), which automatically withdraws payments from your bank account each month and reduces the risk of missed payments.

Your Rights

You have the right to:

• Cure the default and request reinstatement of your installment agreement within 30 days
• Appeal the termination through the Collection Appeals Program (CAP) before or after termination
• Apply for a new installment agreement even if your current one is terminated
• Request a Collection Due Process hearing within 30 days if the IRS issues a levy after termination
• Seek assistance from a Low Income Taxpayer Clinic (LITC) or the Taxpayer Advocate Service

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