What Is an IRS CP523 Notice?

IRS Notices Explained
Written by Enrolled Agent
Reviewed by Enrolled Agent

The CP523 tells you your Installment Agreement is in default and the IRS intends to terminate it unless you take action by the date on the notice. Here’s why you received it, what it means, and how to fix the default or reinstate your payment plan.

Quick Answer

A CP523 is a Default/Intent to Terminate notice for your IRS Installment Agreement. It means the IRS plans to end your payment plan and resume enforced collections unless you cure the default or reach a new agreement by the deadline printed on your letter.

Good news: Many CP523 defaults can be fixed—by catching up missed payments, filing any missing returns, or modifying the agreement. Acting within the window preserves options and prevents levies.

Why You Received a CP523

One or more payments were missed or a payment was returned.
You incurred a new balance after the agreement started and didn’t address it.
You have unfiled returns—installment agreements require all required returns to stay current.
Your financial situation changed and you didn’t adjust the agreement as required.
An administrative or bank change (e.g., account closed) interrupted direct debit.

The CP523 is the IRS’s formal warning that your plan is no longer in good standing and will end unless corrected.

What the CP523 Means

The notice states your agreement is in default and provides a deadline to cure it. If you do not act, the IRS may terminate the agreement and proceed with liens or levies on wages, bank accounts, or other assets. It also explains what caused the default and how to contact the IRS.

This is a critical stage—but it’s also a solvable one. The sooner you act, the simpler the cure.

What to Do Next (Fixing the Default)

Choose the path that matches your situation. The goal is to cure the default or reinstate/modify your plan before termination.

Make up missed payments. If the cause was a late or returned payment, bring the plan current.
File any missing returns. Installment Agreements require full filing compliance. File outstanding returns immediately.
Add new balances to the plan. If a new tax year created a balance, request that it be included and adjust the monthly amount if needed.
Switch to Direct Debit (DDIA). Direct debit reduces default risk and can improve approval odds for reinstatement.
Request modification. If your finances changed, propose a new monthly amount supported by current financials.
Consider alternatives. If the plan isn’t affordable, evaluate Currently Not Collectible status or an Offer in Compromise if you qualify.
Appeal rights. Rejections or terminations can often be appealed (e.g., CAP). Timely requests preserve rights.

Need a roadmap? See our Complete Guide to Back Taxes in the U.S. for how payment plans, penalties, and enforcement fit together—and the best resolution at each stage.

If You Ignore the CP523

If you take no action, the IRS can terminate the agreement and resume enforcement. That can include wage garnishments, bank levies, and federal tax liens. Interest and penalties continue to grow until the balance is fully resolved or placed into another approved status.

It is always easier—and less costly—to fix a default before termination than to rebuild a resolution after levies begin.

How Polaris Can Help

Polaris Tax & Accounting helps taxpayers nationwide cure CP523 defaults and protect cash flow. Our Enrolled Agents confirm balances with IRS transcripts, identify the exact cause of default, and pursue the right fix—catch-up payments, direct debit setup, plan modification, or alternative resolutions.

We handle the conversations with the IRS, prepare financials when needed, and keep you compliant so the resolution holds.

Your Next Step: Keep your agreement alive and prevent levies. Schedule a consultation with an Enrolled Agent.

Related Resources

FAQs

Can I reinstate a defaulted Installment Agreement after a CP523?

Often, yes. Many agreements can be reinstated by catching up payments, filing missing returns, and switching to direct debit. Modification may be required if your finances changed.

Will the IRS levy me after a CP523?

If the plan terminates and you do not arrange another resolution, the IRS can move to levy or file a lien. Acting within the notice window helps prevent enforcement.

What if I can’t afford the current monthly payment?

Request a modification based on updated financials, or consider alternatives such as Currently Not Collectible status or an Offer in Compromise if you qualify.