Security Clearance Process

Failure to File Taxes Will Sink Clearance Eligibility

The filing deadline to submit 2021 tax returns or an extension to file and pay tax owed was April 18, 2022 for most taxpayers. Taxpayers granted an extension will have until October 17, 2022 to file. It is well established that financial issues are the number one reason for a security clearance denial. When broken down even further, failure to file taxes is the top financial issue. Owing taxes is a lot different from not filing them and is not as serious a security concern. Three recent appeals cases with the Department of Energy (DOE) highlight the consequences of not filing taxes:

–          This contractor had not filed state or federal income tax returns for years 2015-17. When asked by the judge as to why, the contractor stated he was just overwhelmed by his tax issues, so he mentally shut off responsibility to get them resolved and to date had not taken action on getting his delinquent tax returns filed.

–          This contractor annotated on his SF-86 he had failed to file his 2011 tax return and that when he tried to file it in 2021 the IRS would not accept it due to being 10 years overdue. At the hearing he confessed that due to laziness he had not filed returns for years 2012-16 until last year and owes approximately $20,000. He also claimed to be in the process of setting up a payment plan.

–          During a reinvestigation it came to light that this contractor had not filed tax returns for years 2014-21. The reason for this, he claims, is he just got behind on several real estate transactions and admitted to having poor self-discipline in holding himself accountable in money matters. The contractor claimed he had hired a tax accountant who was in the process of getting all of his returns filed.

The judges in all three appeals cases found the applicants had not demonstrated good judgment or reliability and had no valid reason for not filing tax returns timely as required by law. As a result of the unresolved financial issues, security clearance eligibility was denied.