What Is IRS Notice CP523?

If you've been making payments on an IRS installment agreement and receive a CP523, it means the IRS is notifying you that your agreement is in default and they intend to terminate it. Common reasons for default include: missing or making a partial payment, failing to file a required tax return while the agreement is active, taking on a new tax liability without notifying the IRS, or failing to provide updated financial information as required.

The CP523 is a notice of intent to terminate — not an immediate termination. You typically have 30 days from the date of the notice to remedy the default before the IRS actually cancels the agreement and resumes collection action. During that 30-day window, you should bring your payments current (including any missed payments), file any unfiled returns, or contact the IRS to explain the situation if there are extenuating circumstances.

If your installment agreement is terminated, the IRS resumes collection action as if no agreement existed — including the ability to levy wages, bank accounts, and other assets. This is why acting within the 30-day window is so important. If you've defaulted because of a temporary financial hardship, you can often reinstate the agreement by catching up on missed payments and possibly providing updated financial documentation. There's a reinstatement fee of $89 (or $43 if your income is below a certain threshold).

If your financial situation has changed significantly — meaning you can no longer afford the original payment amount — don't just miss payments and wait for a CP523. Contact the IRS proactively to request a modification of your installment agreement before defaulting. Keeping the IRS informed of changes in your financial circumstances is generally treated more favorably than defaulting without explanation. If you've been consistently struggling to make payments, it may also be worth exploring whether an Offer in Compromise is a better fit for your situation.