US federal shutdown may hit the start of the Foreign Account Tax Compliance Act (FATCA).
The controversial tax law was due to start enforcement from January 1, 2014, but the Internal Revenue Service (IRS) has announced the 16-day government closure has put back filing tax returns by at least a week.
The IRS explained the shutdown has consumed valuable time software engineers had put aside for testing online tax filing systems.
As a result, the online systems will not be ready to accept tax returns and associated paperwork relating to overseas accounts on January 21, 2014 – the traditional tax filing date in the US.
The IRS reckons individuals can start filing their tax returns from January 28, 2014, at the earliest, but no later than February 4, 2014.
Tax filing delays
“Our hope is the delay will be shorter, but we will make another statement in December to confirm the actual date filing tax returns can start,” said an IRS spokesman.
The spokesman explained that the IRS web team writes, tests and deploys tax return software at this time of year.
“Changing the start date for filing tax returns gives us the time we need to check that the systems work so we can provide a smooth running service without frustrating bugs,” said the spokesman.
“We want everyone to know that a delay is likely so they have the time to adequately plan their tax affairs.”
The IRS has also announced that no paper tax returns will be processed before online filing starts.
The spokesman also pointed out that the April 15 tax return filing and payment deadline is statutory.
Flood of letters and forms
“The IRS cannot change this as it is the law,” said the spokesman. “However, taxpayers can apply for an extension by submitting the appropriate form (4868) online or as a hard copy.”
The government shutdown appears to have hit the IRS hard.
The organisation received 400,000 documents and letters during the shutdown in addition to the 1 million pieces of correspondence in process and hundreds of thousands more received since.
In a previous statement, a spokesman urged taxpayers not to add to the pile but to delay correspondence that was not urgent or to file online wherever possible.
Tax professionals are also in disarray as the distribution of their identification numbers was caught up in the shutdown. The IRS has no date for when registration renewal will start.
Last year, tax filing was also postponed as Congress passed new tax laws at the last minute, leaving the IRS wrong-footed and having to update software and forms to handle the changes.
Are you sure you have your FATCA straight? Months ago, prior to the shutdown, implementation of FATCA was delayed until July 1 2014.