The CP523 is very misleading and does not adequately give taxpayers all of their options. Not only that, but it also has a knack for scaring taxpayers. It's a nasty letter, but does its bite live up to its bark?
What is a Notice CP523?
The IRS sends Notice CP523 to taxpayers who are in danger of losing their installment agreement. The Notice is sent by certified mail. It's a bit intimidating to receive a notice that contains the phrase "Notice of Intent to Levy" or "Intent to Terminate your Installment Agreement" in the heading.
Someone may have a defaulted installment agreement for several reasons. The most common reason is the failure to pay the monthly amount due. Some less obvious reasons that the IRS will default an installment agreement are as follows:
- Failure to meet the required estimated tax payments or deposits;
- Not fully paying the amount due on the return most recently filed; or
- Not providing the IRS with updated information when they ask for it.
It can be quite difficult for taxpayers to keep up with both their installment agreement payments and their estimated tax payments. This can be especially difficult if their income is seasonal or if it fluctuates throughout the year (however, liabilities incurred from the Affordable Care Act individual shared responsibility do not default an existing installment agreement).
What the CP523 means is that the installment agreement was placed into default status but is not yet terminated as of the date listed on the notice. When the installment agreement is in default status, taxpayers have the right to request an appeal. This is commonly referred to as a CAP appeal and gives taxpayers the right to review the reason for removal and to ask for reinstatement.
Taxpayers also have the right to request this CAP appeal for up to 30 days after the agreement is terminated. You will find notification of this appeal in the section entitled, "What you need to do immediately," which can be found on the third page of the CP523.
You have time to act, you can reinstate
This is an important thing to understand – you do have some time. And having some time means that you have options.
In addition to the CAP appeal process, taxpayers have a chance to remedy the reason for the default before the agreement is placed in termination status. Taxpayers have thirty days from the date of the Notice CP523 to cure the reason for the default. For example, if you could not fully pay the amount due on your tax return on April 15th, then you have a chance to pay the rest of the amount due while in default status before your installment agreement is terminated. This option can give you some breathing room! It's not a lot, but it's enough to make a difference.
You should not count on the IRS to automatically reinstate your installment agreement even after making a payment you believe should cure the default. It's important that you take positive action and contact the IRS to ensure that they have cured the default and the installment agreement has been reinstated. This all has to be done relatively quickly.
The 30-day window you have in default status begins on the date printed on the CP523, not when the taxpayer actually receives the notice.
Now that you have been issued a CP523 Notice, should you look for a better solution?
If you default an IRS installment agreement, there may be a very good reason for the default. Maybe the amount was simply too much for you to pay. In many cases, you may have better options than curing the installment agreement and having it start up again. Some strategies, such as a lower monthly payment, hardship status, an offer in compromise, or Chapter 7 bankruptcy to discharge personal tax obligations, can be an even better way to resolve your tax problem.
If you'd like to discuss your options, contact us. We can help. Call us at 888-727-8796 or email firstname.lastname@example.org.