CP523, Installment Agreement Default

A CP523 means the IRS intends to terminate your installment agreement. The notice gives the reason and a date. Cure the problem before that date and the agreement usually survives; let it pass and the balance becomes immediately collectible, with levies available shortly after.

Why agreements default

• A missed or late monthly payment
• A new balance on a later return that was filed but not paid
• A return that was not filed at all while the agreement was in place
• A request for updated financial information that went unanswered

The last two are the ones that surprise people. An installment agreement is conditioned on staying current, so a single unfiled return or an unpaid new balance puts the whole arrangement in default even if every scheduled payment was made.

Keeping the agreement alive

If the default is a missed payment, pay it, along with any payment that has come due since, before the termination date on the notice. If it is a new balance, the balance can often be folded into the existing agreement, though the monthly amount may change. If it is a missing return, file it. Then call the IRS and confirm that the default has been cured.

If the agreement has already terminated, reinstatement is usually available. There is a reinstatement fee, and the IRS may ask for updated financial information before agreeing to the same terms.

Appeal rights

You can appeal a proposed termination through the Collection Appeals Program by asking within 30 days of the notice. The IRS generally does not levy while a CAP appeal of an installment agreement termination is pending. A CAP decision is final and cannot be taken to court, so it is a tool for fixing a mistaken default, not for relitigating the balance. If a levy notice follows, the separate collection due process rights apply.

If the terms no longer work

A CP523 is sometimes the first sign that the agreement was never affordable. Rather than defaulting repeatedly, ask for different terms: a lower payment based on current finances, a partial-payment agreement, or an offer in compromise where the numbers support one. The installment agreement page covers the options.