CP521 Notice: What to Do When You Miss a Payment or Face Cancellation of Your IRS Installment Agreement

If you've received a CP521 notice from the IRS, it indicates that your payment due date is approaching or that you have missed a recent installment payment on your tax debt. This notice serves as a reminder that the IRS is monitoring your payment behavior closely, and further non-payment could lead to more serious consequences.

Key Details of the CP521 Notice:

The CP521 notice will outline the following terms related to your installment agreement:

• Remaining Balance: The total amount you still owe to the IRS.

• Accruing Interest: How much interest has accumulated on your balance.

• Due Date for Payment: The specific date you must remit payment to avoid issues.

• Penalties and Cancellation Terms: Any penalties for late payments, and the consequences of failing to meet the terms of your agreement.

Why It's Crucial to Act on a CP521 Notice:

Receiving a CP521 notice is a warning that you have either missed a payment or are close to missing one. Ignoring this notice can lead to several negative consequences, the most serious being the cancellation of your installment agreement. If this happens, you will be required to pay the full balance immediately, potentially resulting in:

1. Increased Penalties: Your failure-to-pay penalty will rise from 0.25% to 0.5% per month on the outstanding amount.

2. Loss of Repayment Plan: If the installment agreement is canceled, you may lose the option to reinstate it and could be forced to pay your entire balance at once.

3. Legal Actions: The IRS may take more aggressive actions like levies or liens if the balance is not paid in full after the cancellation.

Steps to Take When You Receive a CP521 Notice:

1. Make the Payment: If you’ve missed a payment, make it immediately to avoid further penalties and potential issues with your agreement.

2. Contact the IRS: If you're unable to pay the full amount, reach out to the IRS to discuss your options. They may allow you to renegotiate your payment terms.

3. Revisit Your Installment Agreement: If you’re struggling to keep up with payments, consider working with a tax professional to set up a more manageable monthly payment rate.

4. Avoid Ignoring the Notice: The IRS may cancel your installment agreement if you don’t address this issue promptly, so acting quickly is key to avoiding further financial issues.

What Happens if You Don’t Act:

A CP521 notice is not an indication that your assets will be seized, but it is a signal that you need to act quickly. If you fail to respond to the CP521 notice, your installment agreement could be canceled, which may lead to additional penalties and legal consequences.

Ignoring the IRS can result in much larger problems down the line, so it’s crucial to follow through and make your payment or communicate with the IRS to address the situation.