At the time of this writing, there were over 200,000 United States citizens living within the United Kingdom. For them, tax season is just beginning to ramp up, as it does around this time each year. This year, however, is different. This year, they're facing all new tax forms, regulations, and attachments – and the IRS is currently shut down due to the federal budget impasse in the US. For the UK accountants working with them, that presents a number of hurdles to getting the required returns prepared and submitted in time. The IRS is providing few clues as to what's going on, but here's what we know so far and where the biggest hang-ups could be.
Guidance on refunds
One of the most common questions that you're likely to field from US taxpayers is whether they should expect to receive their tax refund in a timely manner this year. The answer so far is maybe. The Office of Management and Budget went on the record to indicate that the IRS would be issuing refunds, as usual, this year even if there's no progress towards reopening the government. That flies in the face of legal findings during previous US government shutdowns, so it's anybody's guess as to the ultimate reality of the situation. For now, all that's known for sure is that US tax filers must still meet all deadlines and applicable submission dates, regardless of the outcome of the standoff.
Help with new forms
For accounting firms looking to get questions answered regarding the year's new tax forms, or the changes to the tax code that resulted from the Tax Cuts and Jobs Act of 2017, it's going to be rough going if the shutdown continues. As of now, the IRS is operating with about 12.5% of its normal complement of employees, and even when they call workers back they will be tied up on processing the avalanche of returns coming in before the filing deadline. That means that finding anyone to answer any questions is going to be a struggle for individuals as well as accounting firms. The same applies to people that were already working on issues regarding back taxes prior to the shutdown, as their cases have summarily ground to a halt.
Tax ID issues
Individual filers aren't the only ones that could be facing difficulties with their US taxes due to the shutdown. Another consequence of the situation is that the IRS has ceased issuing tax identification numbers, which could be a significant problem for UK businesses and individuals making investments in the United States. Without them, foreign startups cannot do business in the US without potentially running afoul of tax laws there, or even open up domestic bank accounts to fund operations. With the complicated nature of business offshore arrangements, this is no small problem. It also means that UK expats may face difficulties if they're heading to the US for work since they'll be unable to secure an Individual Taxpayer Identification Number for the time being.
Handling asset forfeiture
One of the most difficult –and troubling – results of the government shutdown for anyone that has business with the IRS is the fact that their computer systems are still sending out notices regarding asset seizures. That's leaving many in the unfortunate position of waiting to see if the IRS is going to seize bank accounts or property, even in situations they were on the way to resolving. That poses an even scarier problem for US citizens living here in the UK, who could face the very real prospect of becoming stranded here without access to their financial resources for an indeterminate amount of time.
A holding pattern
For UK accounting firms and their clients that are in the unfortunate position of having business with the IRS right now, there are no easy answers. It's impossible to tell how long it's going to take for the situation to be resolved, and even to figure out how long it will take the IRS to get back up to speed once it is. That adds up to a whole lot of uncertainty for Americans here in the UK and everywhere else in the world. For now, the only thing to do is keep a watchful eye on the situation and hope that something is done before this US tax season becomes a nightmare with global consequences.