The CP523 is a letter from the IRS informing you of their intent to terminate your repayment plan and seize, or levy, your assets. The reason the IRS would send this termination letter is due to a defaulted payment.
You may have received a CP521 recently before this, which highlights your recent missed payment. For whatever reason, it may be, a defaulted payment may have resulted from one of these commonly made mistakes:
- Failure to make a monthly payment (most common)
- Failure to provide the IRS information upon their request
- Failure to pay the required monthly installment amount
Upon receiving the CP523 notice, it does not mean immediate termination of an installment agreement. Your account will go into the IRS’ systems as “default status”, which is removable via a CAP appeal.
A CAP appeal allows you to re-examine the IRS’ reasoning as to why the defaulted you and can offer the possibility of reinstatement for your repayment plan.
The IRS allows up to 30 days after the agreement is terminated to submit an appeal, which if approved could save you from paying the entire amount immediately.
If you plan on submitting a CAP appeal, be sure you are referencing the date stated on the notice, and NOT the date you received it in the mail. There are no exceptions for late appeals, which makes it all the more important to submit your claim in a timely manner.
Note: the submission of a CAP appeal does not guarantee an automatic reinstatement. Your resolution is also dependent on your reasoning and how often you follow up with the IRS.
If you neglect this form, the IRS will roll out its invasive protocols to settle your tax debt such as tax liens, levies, and wage garnishments. However, you still have a few last-resort options that will help mitigate your damages:
- Negotiate a lower monthly payment
- Apply for an Offer In Compromise (OIC)
- Declare Chapter 7 Bankruptcy
- Declare financial hardship status
Being in a repayment plan with the IRS is already a step in the right direction, so why would you want to fall behind? If you feel you are falling behind on your back tax installments, we recommend you call a tax professional right away.