Want to Get Or Keep Your Security Clearance? File Your Taxes

It’s tax season. If you haven’t filed your taxes yet, you’re in good company – surveys and data from the IRS consistently show that as many as one-third of individuals wait until the last week to file their taxes. That’s better than the approximately 7.5 million individuals who don’t file their taxes each year, according to the IRS. If you work for the government, however, you had best not join that distinct group.

When it comes to getting or keeping a national security job there are a few things to be aware of – and one of them is the importance of maintaining good financial health. Year after year, financial issues are the top cause of security clearance denial and revocation for Department of Defense clearances. But not all debt is considered equally. Failure to file taxes displays both a financial and rules-following hubris which can be a particularly painful hurdle for getting or keeping a cleared job. 

Section 26 of the SF-86 application for federal security clearances specifically asks applicants if they have failed to file federal, state or other taxes in the past seven years. Even if you didn’t owe taxes, failure to file can be seen as an issue of reliability and trustworthiness and result in security clearance denial or revocation. Changes to how dependent care tax credits were issued in 2021 means some individuals are dealing with a more confusing tax filing this year, or perhaps even owing when they didn’t expect it. If you’re facing a tax bill you can’t pay, don’t let that keep you from reaching out. Working with the IRS is the best thing you can do to keep your clearance and career on track.

“For security clearances, what they’re looking for is that you’re compliant,” said Jennifer Jones, owner of J. Jones financial and a military spouse who regularly advises government professionals on tax issues. “Even if you have not paid everything that you’ve owed to the IRS, as long as you have a payment agreement with them…that counts. You just want to address that issue head on, proactively, with a professional.”

There can be a tendency to put your head in the sand or try to pretend tax issues aren’t there – but that’s the worst step you can take. If your security clearance does end up in a denial or revocation status, one of the things the judge will ask is what you did to address your issues. Even if that means filing for bankruptcy or setting up a payment plan – the critical thing is that you work to address the issues and don’t just attempt to skirt your obligations. If you have the means to pay your taxes – either in a 401(k) or other investments – the government will want to consider why you did or didn’t take those steps. 

“Reaching out for help is the biggest step that I can identify that makes the difference if your security clearance does come up for review based on financial concerns,” said Kate Horrell, a certified financial counselor. “Being able to say, ‘here’s where I went off track, and here’s what I did about it,’ seems to be the biggest factor in turning that issue around.”

Federal employees and service members can sometimes have a more complicated tax situation than the average individual. If your life and work require you to cross several states – or even spend a stint overseas – all of those locations will affect where you have a tax obligation. COVID-19 meant many employees were working from home for the first time, but changes to the tax code mean many remote workers can’t deduct expenses they may have previously. When in doubt, it’s critical to consult a tax professional or work with a trusted software to help you do the job. Just don’t be like this security clearance holder who blamed his hatred of TurboTax for failing to file taxes for a number of years.

When it comes to keeping a clearance – or a government job – the blame game rarely works. Whether you file Jan. 1 or April 18 (or request an extension!) just be sure you’re compliant. Your career will thank you.