The IRS often provides installment agreements or payment plans for taxpayers in arrears. You can pay off your back taxes in manageable monthly payments, based on your income and expenses.
But sometimes, financial difficulties arise and you can’t make the monthly payment on time. Penalties, interest, and fees start to accrue, and the total amount due becomes unmanageable. It becomes stressful to even think about your unpaid back taxes.
Ignoring IRS notices is never the right solution, especially if you’ve already negotiated an installment agreement with the IRS.
If you negotiate an installment agreement and then miss a payment, you’ll receive form CP523 – Intent to Levy & Intent to Terminate Your Installment Agreement. This notice typically comes via certified mail, signature required.
The IRS gives you 30 days to take care of this notice by making a payment or contacting the IRS to reinstate your installment agreement.
If you make the payment on time, your installment agreement still stands. It’s important to continue making the payments on time once your agreement has been reinstated.
There are several reasons taxpayers may receive a CP523 notice, all related to the terms of your installment agreement.
If you have an installment agreement with the IRS to pay off your past due back taxes in monthly payments over time, and you miss a payment, you’ll receive a CP523 notice.
You may also receive a CP523 if you incurred a new balance that is not part of the agreement and you didn’t pay it. New taxes owed are not typically included in an installment agreement, but failure to pay new taxes on time means you’ve defaulted on your current agreement.
If you made a payment late and failed to include the interest or late fees, you may also receive a CP523.
Finally, if you failed to file a tax return for the new tax year by the due date, the IRS considers that a breach of your current installment agreement and could terminate the agreement.
If you receive a CP523, you’ll first want to find out why you received the form. Did you miss a payment? Pay late? Fail to file a tax return? Or incur new back taxes?
Once you learn why you received the form, you can take action to fix the problem and have your agreement reinstated.
IRS Installment Agreement payments are typically billed automatically via credit or debit card or taken directly from your bank account via ACH debit. It might seem virtually impossible to miss a payment.
However, it can happen.
Perhaps your bank account had insufficient funds. Or your credit card was near its credit limit. Maybe you recently received a new credit or debit card with a new expiration date, but you didn’t file the new payment information with the IRS.
If you were a victim of fraud, you may have been issued a new credit or debit card with a new account number and forgot to report the change to the IRS.
If you skip an auto-payment, it can be easy to miss it. The CP523 notice could be the first you hear of the missed payment. If this is what happened, call the IRS immediately at the number noted on the letter and provide new payment information to keep your installment agreement in good standing.
It’s important to realize that if you wait 30 days before making your late payment, and the IRS does, in fact, terminate your agreement, you might have to fill out more paperwork and pay additional fees to reinstate the installment agreement.
If you missed a payment in your installment agreement because you don’t have the money right now, it’s still important to take action as quickly as possible.
If you don’t have the funds to maintain the agreement, contact a tax attorney, CPA, or IRS enrolled agent to help you negotiate a new arrangement with the IRS. There may be fees involved to initiate a new agreement, but it is a better solution than ignoring the notice and allowing fees and penalties to continue growing.
If you can’t pay the past due amount by the due date listed on the notice, you or your tax representative can call the IRS to discuss the reasons why you missed a payment and potentially establish a new due date.
You may be able to file Form 433-F, an updated financial statement, to negotiate a new installment agreement. You will be charged an $89 fee to restructure your agreement.
Maybe you think you sent a payment, but the IRS didn’t receive it. Or you made the payment but the IRS made an error in recording it.
If you disagree with the past due amount for any reason, call the number on the form to discuss the situation with an IRS representative.
You may wish to have a back tax assistance specialist, such as a CPA, tax attorney, or IRS enrolled agent, assist you in your calls with the IRS.
If you receive form CP523, you also have the right to request an appeal with the IRS Office of Appeals. You can do this by phone or file Form 9423 – Collection Appeals Request. A back tax assistance specialist should be able to help you determine if you are eligible to file an appeal or not.
If you choose to take no action upon receiving form CP523, the IRS can terminate the installment agreement after 30 days and take steps to levy your wages and/or seize funds from your bank account to collect the unpaid back taxes. The IRS is also likely to demand payment in full immediately.
The IRS offers payment plans through its Fresh Start program to help business owners and individual taxpayers manage their finances by paying off their back taxes over time.
Ignoring a CP523 notice will cause interest and fees to add up, making it even harder to pay off your back taxes. Don’t ignore a collections notice from the IRS.
Having trouble making your payments? Let Solvable help you find a reputable back tax assistance firm so you can restructure your installment agreement and get back on track with on-time payments to the IRS.