Government Shutdown – How Does It Affect US Expat Taxes and the Offshore Voluntary Disclosure Program?

gov't shutdown and offshore voluntary program

The US Government has been ‘shutdown’ since October 1st and after two weeks, many questions still remain. What facets of government are completely shut down? Which are functioning partially? When will it re-open? For expats, the operation of the Internal Revenue Service is the biggest question to be answered.

Do I Still Need to File by October 15?

As the final extension deadline approaches, the IRS is still processing returns so yes, you do still need to file. Your US tax obligations (both payments and filings) are unaffected by the shutdown and you are still expected to abide by the deadlines. Payroll tax returns, business income tax returns and any other returns with a filing deadline must also be filed in a timely manner.

The IRS is not accepting paper returns at this point so filing your return electronically is your best bet. If you choose to send a paper return, make sure you use a service that provides tracking information in case you need to prove your return arrived on time (even if it isn’t being processed immediately). The IRS has not clearly stated whether or not an IRS employee will be available to sign for private delivery services, though, so you are highly encouraged to file electronically.

If you expect a tax refund you can expect a potentially lengthy delay in processing. After 45 days, you will begin earning interest on that money and the full amount you are owed will be paid. But when that will be is anyone’s guess.

The Shutdown and the Offshore Voluntary Disclosure Program

The Offshore Voluntary Disclosure Program (OVDP) was created by the IRS as a way for delinquent taxpayers to come forward and become compliant with their US tax obligations. Entering the program has never been a ‘given’. You must submit a request to be admitted, then wait for the IRS to respond with a ‘preliminary acceptance letter’. If accepted you would then submit the full OVDP package of information and again, wait for their response. The process has been painfully slow up until now, as there is an overload of requests and not enough personnel to process them. Add in the shutdown and now you’ve got a real backlog.

Currently, submissions are not being processed. Revenue agents are not being assigned to already-complete OVDP package submissions, even those that received pre-clearance and were accepted to the program. But, this doesn’t mean you shouldn’t begin the process if you want to enter OVDP. Once regular operations resume your request will be processed and you will be identified as a delinquent individual who is actively addressing your obligations. And this is much better than sitting back and waiting for the IRS to get back in action and track you down. The shutdown is not an excuse not to act.  While the hotline to answer questions is unavailable you are still able to fax your pre-clearance inquiry-it is just unclear how long it will be before anyone will actually be available to evaluate your request.

There are many unanswered questions at this point, but if you are behind on your US taxes and OVDP is an option for you, you should still submit your request for acceptance.

Questions About the Offshore Voluntary Disclosure Program?

If you need additional information about OVDP or simply how to get caught up on your US taxes or would like to speak to an expat tax expert, contact us today!