What Is a CP523 Notice?
A CP523 notice means the IRS is about to cancel (default) your existing installment agreement. It is titled "Intent to Terminate Your Installment Agreement" and gives you a 30-day window to cure the default before the IRS officially terminates the agreement and reinstates full collection authority.
If your installment agreement is terminated and you take no action, the IRS can immediately resume levy actions — wage garnishments, bank levies, and asset seizures — without sending additional pre-levy notices.
Why Did You Receive CP523?
Installment agreements can default for several reasons:
Missed Payment: The most common cause. Even one missed monthly payment can trigger CP523.
New Tax Liability: If you incur a new balance (from a recently filed or assessed tax return) and do not include it in your current agreement or pay it separately, this constitutes a default.
Unfiled Tax Return: Your installment agreement requires you to remain in filing compliance. Missing a required tax return — even for a year with no balance due — can default the agreement.
Dishonored Payment: A returned check or failed ACH payment can trigger default even if the funds were available a day later.
Material Change in Financial Condition: In some cases, the IRS may revisit an agreement if it believes your financial situation has improved significantly.
What Happens If You Do Nothing?
After 30 days from the CP523 notice date with no resolution:
- The installment agreement is formally terminated
- The IRS sends a Notice of Federal Tax Lien (if not already filed)
- The IRS sends a Final Notice of Intent to Levy (LT11 or Letter 1058) — starting the 30-day levy clock (though in some cases, the prior LT11 from before the agreement was established may be used)
- Levy action can begin
The IRS does not have to start the entire notice sequence over again. In some cases, a defaulted installment agreement can lead to levy action faster than the original collection sequence.
How to Cure the Default
Make the Missed Payment Immediately
If the default is due to a single missed payment, paying it as soon as possible — ideally before contacting the IRS — demonstrates good faith and simplifies reinstatement.
Contact a tax professional.
Explain the reason for the default and request reinstatement of your existing agreement. The IRS can often reinstate an agreement with a $89 reinstatement fee if you have a good compliance history. Be prepared to discuss what changed and how you will prevent future defaults.
File Any Unfiled Returns
If the default was triggered by an unfiled return, file immediately — even if you cannot pay any balance owed.
Propose a New or Revised Agreement
If your financial situation has changed, you may need to propose a revised installment agreement with a new payment amount. If your balance has grown or you can no longer afford the prior payment, discuss options for a restructured agreement.
Request Currently Not Collectible Status
If you genuinely cannot afford any payment, document your financial hardship and request CNC status.
Switching to a Direct Debit Agreement
If your agreement defaulted due to a missed payment or payment processing issue, consider switching to a Direct Debit Installment Agreement (DDIA). Payments are automatically withdrawn from your bank account each month, eliminating the risk of missed or forgotten payments. DDIA also qualifies you for federal tax lien withdrawal under Fresh Start for balances under $25,000.
The Reinstatement Fee
The IRS charges an $89 reinstatement fee to restore a defaulted installment agreement. This is much less costly than the consequences of allowing the agreement to terminate. If you qualify as a low-income taxpayer (at or below 250% of the federal poverty level), the fee may be waived.
Preventing Future Defaults
After your agreement is reinstated:
- Set up automatic bank withdrawals (DDIA) to prevent missed payments
- Mark your calendar for each monthly due date
- File all future tax returns on time, even if you cannot pay
- Pay any new tax liabilities before they trigger a second default