An IRS Form CP 523 is really sent to a taxpayer after they have defaulted their installment agreement in some way.
As you can see from this example on page one, which is on the left hand side of your screen, you can see that in this particular situation, the individual failed to provide updated financial information as requested by the IRS.
This is sometimes a requirement in installment agreements, but particularly, partial pay installment agreements, where the taxpayer is not going to full pay the liability within the life of the collection steps, the limitations.
If you don’t understand that, don’t worry about it too much. It basically means that in certain installment agreements where the payment is too low to full pay within 10 years, then the IRS is going to go ahead and reevaluate the situation, the financial situation, and the taxpayers ability to pay every two years or so.
There are a couple other reasons that we see for CP523s being issued. They include mispayments, late payments, bounced checks, or they defaulted in some other way. Sometimes the IRS gets pretty darn imaginative about how they’re going to default an installment agreement.
We’ve seen it where a taxpayer, particularly with very large liabilities, where they full pay a particular year. Let’s say they owe $80,000 and they finally get around to paying that one, but they have other liabilities, the IRS is taking to defaulting these installment agreements, even though the taxpayer has upheld their end of the bargain.
Typically it’s not that hard to reinstate. It requires a phone call. Sometimes those phone calls can take an hour or more, so it’s really a hardship to taxpayers and really sort of an annoyance to them.
There’s one other thing that’s important to note about most CP523s, and that is that there is a deadline of 30 days from the date of the letter that you actually have the right to appeal the decision to default your installment agreement.
The way you would appeal that is you file a cap appeal, a collection appeals program appeal, which I believe is on Form 9423. You go ahead and follow the directions on the 9423, you send it in, and the IRS has to react or has to answer that appeal, and so they can’t default it.
I would suggest that if you wanted to keep your installment agreement in place, the best thing for you to do is to continue making your payments at all costs, make up any late payments or bounced check payments, and then it is often a very good idea to call the IRS and just simply ask them to reinstate the installment agreement. We find that that works very well in certain circumstances.
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