TIPS TO PREVENT TAX LIENS FROM IMPACTING YOUR SECURITY CLEARANCE
Every year, hundreds of thousands of applicants submit for security clearance approval or renewal. Simply completing the Form SF86 – all 127-pages – is a daunting task itself. Applicants do not need any additional hurdles interfering with receiving their successful approval. Yet, the existence of an outstanding tax debt is a frequent basis for security clearance denial. If an applicant has a tax lien, follow these steps to increase your likelihood of a favorable outcome.
Resolve Your Delinquent Taxes Prior to Submitting Your Application
Many applicants believe that they can submit their security clearance application and then resolve their tax delinquency afterward. They mistakenly assume that they need only resolve the tax lien prior to a decision being issued on the application. Wrong! Once the application is submitted, the research into the applicant’s background can commence promptly and any outstanding tax debts may quickly result in a negative assessment.
While this requires advance planning, applicants must do everything in their power to resolve all outstanding tax debt prior to submitting the application. Doing so will give a person a much better chance of having the application approved.
After a security clearance application is denied, you are typically issued a “statement of reasons” advising as to the basis for the decision. From there, the applicant typically has appeal rights. However, once you are this far along, you are way behind the curve. You want to start out this process as a “Winner”; not forced into filing an appeal with the hope of mounting a come-from-behind rally. To put yourself in the best place position, resolve your delinquent tax issues prior to submitting your application or renewal.
Mitigation, Mitigation, Mitigation!
The reality is, most applicants simply are not in a position to quickly resolve their tax lien prior to the due date for their application or renewal. Fortunately, the laws that govern security clearance issuances allow tax liens and other debts to be viewed less critically when the applicant has initiated good-faith efforts to repay the debt or when there are clear indications that the problem is being resolved or is under control. So, take action immediately to show your efforts to resolve your tax lien.
Equally important – document your actions! Be sure to keep records of all the steps you have taken so that, if the time comes, you can demonstrate your efforts to mitigate and responsibly resolve the debt.
Tax Liens Are Treated Just As Any Other Debt.
Many applicants make the mistaken assumption that a tax lien will be viewed more favorably than other debts, such as a repossessed car or outstanding credit card debt. No so. The government views tax debt in a very similar manner to how it views many other forms of debt. Ultimately, the guidelines under which applications and renewals are decided look for debts that demonstrate the failure to live within one’s means. From the Government’s perspective, failure to live within your means reflect poor self-control, lack of judgment, or unwillingness to abide by rules and regulations. Not attributes associated with a person handling Classified Information. Accordingly, a tax debt, like most other forms of debt, will have a similar negative impact upon a clearance determination.
BONUS – Don’t Go At Alone!
If you have already been denied and are now at the appeal stage, you have the option to proceed pro se, which means to represent yourself. This is often a very bad idea. Application appeals are viewed through the prism of a specialized legal analysis, and it is critical that you have an attorney on your side who understands the legal issues being advanced.
When an application or renewal has been denied, your career is often in jeopardy. Approach this issue with the seriousness it deserves and consult with an attorney who has experience in security clearance issues to help you through the process.
FAQs
Applicants do not need any additional hurdles interfering with receiving their successful approval. Yet, the existence of an outstanding tax debt is a frequent basis for security clearance denial. If an applicant has a tax lien, follow these steps to increase your likelihood of a favorable outcome.
Do security clearance investigators look at tax returns? ›
During the background and security clearance investigation, investigators will review delinquency in paying debts, tax obligations, certain criminal offenses and the illegal use or possession of drugs.
Do tax liens show up on your credit report? ›
Tax liens used to be included on your credit reports, even if you paid them off. Today, however, they're no longer included — but they are still part of the public record and can be seen by potential lenders, landlords and employers.
Does the IRS remove a lien after 10 years? ›
A federal tax lien usually releases automatically 10 years after a tax is assessed if the statutory period for collection has not been extended and the IRS does not extend the effect of the Notice of Federal Tax Lien by refiling it.
How much debt will deny security clearance? ›
No branch of the military has a set amount of debt that is the breaking point for security clearance. You could owe $5,000 or $50,000 and be granted or denied clearance. It's all a matter of how you deal with the debt. Responsible behavior in tackling your debt problems is considered a positive.
What disqualifies you from security clearance? ›
What can disqualify you?
- You are not a U.S. citizen.
- You were dishonorably discharged from the military.
- You are currently involved in illegal drug use.
- You have been judged as mentally incompetent or mentally incapacitated by a mental health professional.
- You have had a clearance revoked for security reasons.
Illegal drug use/involvement. Mental incompetency or psychological conditions. Dishonorable discharge from the military or revoked security clearance. A history of financial problems.
What will get you denied a security clearance? ›
More specific conditions that may endanger your security clearance include: A history of deceptive or illegal financial acts like embezzlement, tax evasion, and fraud; Failure to satisfy your debts; and. Financial problems caused by gambling, drug abuse, or alcohol abuse.
Can background checks see IRS? ›
Generally, tax records won't show up on any background check report but there are some exceptions. Since the IRS doesn't share information with third parties, it's impossible for background check services to find out about your tax returns – so don't worry if you returned them late.
How bad does a lien affect your credit? ›
In short, consensual liens do not adversely affect your credit as long as repayment terms are satisfied. Statutory and judgment liens have a negative impact on your credit score and report, and they impact your ability to obtain financing in the future.
How a lien affects you. Assets — A lien attaches to all of your assets (such as property, securities, vehicles) and to future assets acquired during the duration of the lien. Credit — Once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit.
Do tax transcripts show liens? ›
Request An IRS Tax Return Transcript Analysis
I will provide a breakdown of your risk for collection, your IRS payment history, the collection statute expiration date (CSED) any tax liens or levies released or filed, interest and penalties you have accrued, and active IRS demand letters.
Does the IRS forgive tax debt after 10 years? ›
Background. Each tax assessment has a Collection Statute Expiration Date (CSED). Internal Revenue Code (IRC) 6502 provides that the length of the period for collection after assessment of a tax liability is 10 years. The collection statute expiration ends the government's right to pursue collection of a liability.
What is a silent lien? ›
Liens are the government's legal claim against your property when you neglect or fail to pay a tax debt. A silent lien is a lien that is not made public. An automatic lien (like an estate lien) is one that is triggered automatically, as in the death of a taxpayer.
Does the IRS destroy tax records after 7 years? ›
Individual tax returns (the Form 1040 series) are temporary records which are eligible to be destroyed six (6) years after the end of the processing year, unless extended due to an Open Balance Due - Collection Statute Expiration Date.
Does money owed to IRS show up on background check? ›
In the past, your IRS debt may have appeared on your credit report if the IRS filed a Notice of Federal Tax Lien against you. Starting in 2018, the three major credit bureaus removed tax liens from consumer credit reports. However, lenders may still search public records for tax liens.
What will affect my security clearance? ›
Each application is individually assessed, and some clearance applications can be denied. The AGSVA website presses the most important factors in the clearance process are your honesty, openness, and thoroughness when completing your security pack and answering questions.
