As of 12 am October 1, 2013, the US government “shutdown” due to a lack of budget. It is the role of Congress to prepare and pass a spending bill, also known as a budget, prior to the start of each fiscal year. The US government’s fiscal year runs from October 1st to September 30th, hence the seemingly odd timing of today’s shutdown.
Without a budget, spending on non-essential services comes to a halt. In practical terms, 3.3 million US government workers will continue to work today, though some without pay, while another 800,000 in non-essential roles have been immediately furloughed.
Departments like the US military, Customs & Border Patrol, and Homeland Security will remain open, though non-essential administrative tasks may be curtailed. This means that US border crossings and ports of entry should remain open and operational. Immigration services should continue, though may be delayed where there is reliance on input from other government agencies.
The IRS will also remain open, but with 86,000 IRS employees furloughed its services will be severely restrained. No taxpayer services will be available, the IRS headquarters will be closed and administrative functions stopped. The IRS will continue to process US tax returns submitted electronically or with remittances. The IRS criminal division will continue to operate in order to avoid missing any key deadlines.
Canadians can expect delays when dealing with the IRS and US Citizenship and Immigration Services (a division of Homeland Security). We expect the processing of Individual Taxpayer ID Numbers (ITINs), Employer ID Numbers (EINs), Foreign Investment in Real Property Tax Act (FIRPTA) withholding certificate applications, and similar services to be delayed by several days to several weeks, depending on the length of the government shutdown.
In addition to the aforementioned, Canadians can likely expect to see a drop in the value of the US dollar. As of yesterday, while the government shutdown loomed, the US dollar had already slipped 0.2%. There may also be significant repercussions reflected in the US Stock Exchange. A prolonged shutdown is expected to bring further negative consequences for the US, and world economy. A mid-October deadline to increase the US debt ceiling could result in a technical US Treasury default. The result would likely be dizzying stock market plunges around the globe.
As always, at Altro LLP, we are keeping a close watch as events unfold, and will keep you abreast of pertinent changes.
The information contained herein is for informational purposes only, and is not legal advice or a substitute for legal counsel. It is not intended to be attorney advertising or solicitation. If you have a legal question, please consult with a licensed attorney.