Most Common Tax Issues Affecting Security Clearance Holders
As noted above, it is quite often the case that we represent security clearance holders or applicants who have had trouble either in the timely filing of taxes or with the payment of their state, federal or local taxes. While the tax security concern most often falls under Adjudicative Guideline F, Financial Considerations, it can also fall under Adjudicative Guideline E, Personal Conduct.
The most common issues for security clearance holders or applicants when it comes to taxes is two-fold: (1) the timely filing of federal, state or local tax returns; and (2) timely payment of an individual’s taxes. As noted above, the tax issues can involve the Internal Revenue Service or state or county tax authorities.
Over the years, the timely filing of tax returns has almost been more important to security clearance adjudicators than the person actually being current on their tax payments. The good news for security clearance holders is that tax issues are becoming slightly easier to mitigate if one can demonstrate the effort under Security Executive Agent Directive 4 (SEAD 4). It used to be that untimely (or non-existent) filing of tax returns would result in almost an automatic clearance denial, but the newer clearance guidelines and the mitigation of such types of cases has become a bit easier.
Mitigation of Tax Concerns – Steps to Take
The most important step for a security clearance holder or clearance applicant with tax issues is to work with a tax attorney/accountant and the tax authorities at issue to start to try to resolve the issues. If a resolution is obtained from the Internal Revenue Service (IRS) or other tax authorities, then mitigating the security clearance concerns can become easier. Even if the individual just shows some initiative that they are trying to be responsible regarding their taxes it can be helpful.
The new focus by security clearance adjudication authorities has been on resolving the underlying tax issues. There is still an issue that may have to be dealt with regarding the timeliness of the filing of past returns, but the focus has shifted, primarily, to how the individual has resolved their tax issues. The new Guideline F, Paragraph 20 (g) at page 16 states that mitigation can be shown where “the individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements.” This is a new addition to the security clearance guidelines for Guideline F, involving taxes.
To show mitigation for tax issues under Guideline F, individuals should obtain copies of their tax transcripts, where possible, but also obtain other potential information about payments and receipts. This can be a paper-intensive process. Additionally, any correspondence with tax authorities is helpful. The goal is to show security clearance adjudication authorities that the individual has attempted to rectify the tax situation.
Other issues that could mitigate the failure to file tax returns properly or on time include: (1) individual maturity or knowledge when filing returns; (2) the uniqueness of the tax situation or issues that could have affecting tax filings; (3) a more recent record of filing taxes on time; (4) classes or other guidance received from tax professionals that illustrate how the individual has learned from the deficient filings; and (5) the amount of time that has passed since the late tax filing issue.
It is also not a bad idea for individuals facing this issue to retain an accountant to oversee the tax filing process which can potentially be used to mitigate these issues as well. I have attached a link to a case that is helpful in explaining the new approach to reviewing tax issues. That case is attached here.
Other examples of tax-related clearance issues are located here; click the Example for the case-related link.
Example A: Applicant failed to mitigate the security concerns raised by his delinquent tax filings, tax debts, and other financial delinquencies. Eligibility for access to classified information is denied. CASE NO: 17-01199.h1
Example B: Applicant, tax liens, mitigated the security concerns at issue because they were related to circumstances beyond his control.
Whole-Person Concept Mitigation for Tax Issues
Additionally, it can be helpful in these types of cases for a review of the Whole-Person Concept, which can demonstrate the overall trustworthiness of the individual. Oftentimes, former military service members and others with a dedicated background with the government can receive additional consideration when attempting to mitigate tax issues that have arisen in the security clearance process
If you are in need of assistance related to taxes and the security clearance process please contact our office at (703) 668-0070 or through our contact page to schedule a consultation. Please also visit and like us on Facebook or Twitter.