IRS notice
IRS Notice CP523: Your Payment Plan Is in Default
You defaulted on your IRS installment agreement; the IRS intends to terminate it and levy wages or bank accounts unless you act.
Act now
Contact the IRS within 30 days of the notice date and pay before the termination date printed on the notice, after which the IRS can end the agreement and begin collection.
A CP523 (or CP523 SP, or CP623) generally means you have defaulted on your installment agreement and the IRS intends to terminate it and levy your assets. Contact the IRS as soon as possible and no later than 30 days from the notice date, and pay before the termination date on the notice to keep the agreement in place or ask to reinstate it.
What this notice is telling you
- The IRS considers your installment agreement in default.
- Unless you act, it plans to terminate the agreement and start collection, which can include a federal tax lien and levies on wages or bank accounts.
- The notice also warns that seriously delinquent tax debt can lead to denial or revocation of a US passport.
- You can ask to reinstate the agreement, and you can appeal a proposed termination if you disagree.
What to do
Find out why you defaulted
The notice explains the default. Common causes are a missed or short payment, an unfiled current return, or a new balance that came due while you were on the plan.
Fix the cause before the termination date
Pay the missed amount, file the missing return, or pay the new balance. The IRS says reinstatement may require paying a reinstatement fee or paying any new liability in full.
Call the number at the top of the notice
Ask to reinstate the agreement. Call even if you have already corrected the problem, so the IRS can record it and reinstate the plan.
If the old terms no longer work, renegotiate
If your income has changed, ask about revising the plan rather than reinstating a payment you can't sustain. The IRS may ask for updated financial information.
If you disagree, appeal within 30 days
Talk to the IRS first. If that doesn't resolve it, you can appeal the proposed termination to the IRS Independent Office of Appeals through the Collection Appeals Program, generally within 30 days.
The protection you still have, and when it ends
By statute, the IRS generally cannot levy while an installment agreement is in effect, for 30 days after it is terminated, or while an appeal of the termination is pending. A CP523 is the warning before that protection runs out. Acting before the termination date on the notice is the simplest way to keep the agreement alive; once it is terminated, you are negotiating from a weaker position with levy possible.
Reinstating versus appealing
| Question | Reinstatement | Collection Appeals Program (CAP) |
|---|---|---|
| When it fits | You agree you defaulted and can cure it | You believe the termination is wrong |
| How | Call the number on the notice; cure the default | File Form 9423, Collection Appeal Request; for payment plans, a manager conference first is not required |
| Timing | Before the termination date; contact within 30 days | Generally within 30 days |
| Effect | Agreement continues, possibly with a reinstatement fee | The IRS generally holds the disputed action while Appeals decides; the decision is final, with no Tax Court review |
If the agreement is terminated
The IRS says it will begin collection action, which can include filing a Notice of Federal Tax Lien and levying wages or bank accounts. At that point you may need a new payment plan, and depending on your finances, other options such as an offer in compromise or currently not collectible status may be worth reviewing. Keep current-year filing and payments up to date; a new agreement is hard to get while a fresh balance is building.
Where this notice sits
The usual order. Not every account gets every notice, and some steps can be skipped.
Want a CPA to deal with it?
Bring the notice to a free consultation, in person on James Island or by video. We read it with you, tell you what it means for your account and, if you want us to, take over the response once you sign Form 2848.
IRS & SCDOR letters — Find your notice number below, see what it means and which date matters, then let a licensed CPA deal with the IRS or SCDOR on your behalf.
Sources
By Haigler CPA Group. Updated . Notices are revised from time to time, so go by the wording and dates on your own notice. The information on this site is general in nature and is not tax, legal, or accounting advice for your situation. Tax law changes and the right answer depends on facts we would need to review with you. Please speak with a qualified professional before acting on anything you read here.
Questions about CP523
Can my payment plan be reinstated after a CP523?
Often, yes. The IRS asks you to call the number on the notice about reinstatement. You may need to pay a reinstatement fee or pay any new tax liability in full.
Can the IRS levy my bank account right away?
Generally no. By statute, the IRS cannot levy while the agreement is in effect, for 30 days after it is terminated, or while an appeal is pending. After that, levy is possible.
I missed a payment because my income dropped. What should I say?
Explain the change and ask whether the plan can be revised to a lower payment. The IRS may want updated income and expense information before agreeing to new terms.
Why does a payment plan notice mention my passport?
Under the FAST Act, the State Department generally can't issue or renew a passport for someone with seriously delinquent tax debt.
Other notices
- CP90: Final notice: intent to levy and your right to a hearingFinal notice before the IRS levies wages, bank accounts or other property, with a 30-day window to request a Collection Due Process hearing.
- IRS notice lookupEvery IRS notice carries a code. Find yours below to see what it generally means, which date matters, and what to do before that date passes.
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