IRS CP523: intent to terminate your installment agreement

CP523 (and CP623) is sent when an installment agreement goes into default — most often because of a missed payment, but also because of a new balance from a later year or an unfiled return. The notice gives a termination date. Until then, the agreement can usually be saved. The IRS notes you may have to pay a reinstatement fee or pay any new tax liability in full.

A default notice comes after you've already set up a payment plan. If the agreement terminates, your account goes back into active collection: the IRS can file a lien and, once the required levy notices have been issued, levy wages and bank accounts. You have separate rights to appeal a termination through the Collection Appeals Program.

Scam letters copy IRS formatting, so confirm a CP523 before acting on it. Log in to your IRS Online Account — most notices, balances and payment history appear there — or request an account transcript. A genuine notice shows a notice or letter number (usually in the top or bottom right corner), the tax year, and explains your rights. If you call, use a number you find on IRS.gov, not a number printed only on a letter you're unsure about. The IRS doesn't demand payment by gift card, prepaid debit card, cryptocurrency or wire to an individual, and it doesn't threaten immediate arrest.

Act before the termination date printed on the notice. That date is your real deadline.

If you believe the default is an error — for example, a payment was made but misapplied — call the IRS at the number on the notice before the termination date with proof of payment. If the IRS terminates the agreement anyway, you can appeal the termination through the Collection Appeals Program (Form 9423), and a timely CAP request generally keeps the IRS from levying while the appeal is considered.

After termination the IRS resumes collection: it may file a federal tax lien and levy wages, bank accounts or other property. You'd then have to apply for a new agreement, possibly with more financial disclosure.

If you owe and can't pay in full, you have options:

• Pay in full online through IRS Direct Pay or your Online Account to stop further interest and penalties.
• Short-term plan of up to 180 days, with no setup fee.
• **Installment agreement** — individuals who owe $50,000 or less in combined tax, penalties and interest can usually apply online. Larger balances generally need a financial statement (Form 433-F or 433-A).
• **Currently Not Collectible** status if paying would prevent you from covering basic living expenses.
• **Offer in Compromise** only if you can't realistically pay the full amount before the collection statute expires — most applicants don't qualify.
• **Penalty relief**, including first-time abatement, which can remove failure-to-file and failure-to-pay penalties.

Interest (currently 7% a year, set quarterly) continues on any unpaid balance.

You don't need to pay anyone to respond to a CP523. The Taxpayer Advocate Service, an independent organization inside the IRS, helps people whose problems aren't being resolved through normal channels or who face significant hardship. Low Income Taxpayer Clinics offer free or low-cost representation to eligible taxpayers, including in disputes with the IRS. Volunteer programs such as VITA can help prepare missing returns. If you do hire paid help, choose a credentialed professional — a CPA, enrolled agent or attorney — who can represent you before the IRS with Form 2848, and be wary of anyone who guarantees an outcome, demands large upfront fees, or tells you to stop communicating with the IRS. See red flags to watch for.

1. Read the whole notice and note the date, tax year and any deadline.
2. Verify it in your IRS Online Account or with a transcript.
3. Gather records — the return, payment proof and any documents the notice mentions.
4. Decide: agree and pay/verify, dispute with documentation, or request the hearing or appeal the notice describes.
5. Respond in writing or by the method shown, before the deadline, and keep copies and proof of mailing.
6. Get help if needed. You can authorize a CPA, enrolled agent or attorney with Form 2848, and the Taxpayer Advocate Service or a Low Income Taxpayer Clinic may help for free.

Want to see which relief options fit your situation? The free calculator on this page takes about a minute. It's an educational estimate, not a guarantee.