The IRS defines a breach of an installment agreement as the provision of inaccurate or incomplete information, or the failure to comply with the required terms of the agreement. In this case, the IRS may propose the termination of the installment agreement and terminated installment payment agreements. For help after receiving CP 523, talk to a licensed tax professional experienced in resolving issues related to installment agreements. The IRS may propose termination if the taxpayer fails to make an installment payment when due, does not pay another tax liability, does not provide an updated financial statement, provides inaccurate information, and does not pay a modified payment based on the updated information submitted.
If the IRS determines that the agreement must be breached, it will issue a letter to the taxpayer notifying them of its determination. The taxpayer can request a Collection Appeals Program (CAP) hearing to discuss proposed cancellations and the actual terminations of installment agreements. The CP 523 notice (non-compliance with the IRS installment agreement) is the letter that the IRS sends when you don't comply with an IRS payment plan. Taxpayers who do not comply with the terms of the installment agreement “will receive written notice and will be given 30 days to comply with the terms of the agreement before the agreement is terminated (IRS).
To avoid this, contact the IRS or ask a tax professional to reinstate your payment plan as soon as you receive notification of non-compliance with your payment plan from the IRS. If the IRS terminates your contract due to new outstanding tax obligations, you may have to pay those amounts before you can restart your payment plan. In some cases, you may be able to provide limited financial information over the phone (usually employer and bank information) if you can pay under the simplified terms of the installment agreement. If the taxpayer ends up not complying with their installment plan and becomes subject to collection activity, this is probably one of the first places where the IRS will file a tax action.
It's generally best for taxpayers to try to meet all of these requirements before attempting to establish a tax payment plan with the IRS, as this will minimize the time they may be exposed to active IRS collections and adverse collection activities. However, the IRS has the discretionary power to request new financial information based on your circumstances to reinstate the agreement. If the IRS terminated your payment agreement by mistake or you disagree with the amount owed, contact the IRS at the number at the top of the letter. If a taxpayer is not in good standing with the IRS within 90 days, they may face forced collection from the IRS.
If you can't resolve the situation by calling the IRS directly, you can apply for a CAP (Collection Appeals Program) to challenge the termination of the installment agreement.
