As of today, 17% of the Federal Government is currently shutdown. Along with war memorials, scenic overlooks and the Amber alert system, 90% of the IRS is shut down as well. Part of this 90% includes most of the Offshore Voluntary Disclosure Program (OVDP) employees.
OVDP Delays During the IRS Shutdown
Any disclosure made goes to one of three places—the gatekeeper is in Philadelphia, which is the place where pre-clearances are sent, questions are asked; etc. They process intake documentation and send out acceptance letters to the program.
From bottom to top, how your OVDP case will move through various OVDP departments until your 906 or opt-out
Taxpayers then send their full submission with returns, FBARs, consents, supporting statements, etc., to the Austin address. This is where they are gathered and assigned to an examiner in one of many field offices.
The shutdown means first and foremost that step 1 in Pennsylvania is shut down—the hotline itself is closed, with a message similar to all IRS lines ("we will reopen and start making calls as soon as possible"). It also means that no one is processing pre-clearances or sending them out, processing intakes, or sending acceptance letters. They may be backing up further and further right now.
Secondly, the Austin office isn’t assigning out submissions. This is already a slow part of the process, where our clients often wait six, nine, twelve months after full submission to be assigned to an examiner. The backlog had seemed to be clearing up previously, but it is possible that this will strike a blow at any progress made.
Finally, although some individual examiners are currently working, thus far I’ve only spoken to one—most have a message on their voice mail saying they are out until further notice and will deal with things as soon as they return.
We have yet to see how this affects the “deadlines” set by the program, which are generally unenforced in the best of times. The truth, which all participants know, is that the OVDP is backed up and getting more backed up by the day. They have more submissions than they can handle and not enough staff to deal with it. A senior revenue agent recently told me that they had been expecting a group of new hires to handle the volume — that has now been eliminated.
Add to that piles and piles of mail stacking up in Philadelphia, in Austin, in Florida, in New York, and it means that if you’re curious how this affects you, no matter where you’re at in the process, the answer is the same: It’s going to take a long, long time. Expediting our side of the process is our first priority, but ultimately we’re at the whims of the service, and as long as the doors are shuttered, deadlines march on, interest accrues, and cases wait.
Why it still makes sense to disclose even during the IRS delay
Not everyone at the IRS is laid-off. Some of IRS criminal investigations is still working. Therefore, we can at least get your pre-clearance in — that provides some prophylactic from subsequent criminal charges.