Call it an overactive conscience or inadvertent self-sabotage; either way, some security clearance holders set themselves up for tax problems that aren’t, in fact, problems. I’m talking about the financial history section of the SF-86 form and the question that asks if an applicant has failed to file or pay taxes, as required, during the last seven years. Recently, we’ve seen several applicants check “YES” and then proceed to document a history of apparent non-compliance with their tax filing or payment obligations that results in a Statement of Reasons to revoke their security clearance.
Tax Compliance Noted On the SF-86
On the surface, non-compliance with tax laws is a problem; security clearance officials go after tax cases aggressively under the theory that if you won’t comply with your tax filing and/or payment obligations, you don’t possess the requisite trustworthiness and reliability for access to classified information. In reality, however, these particular cases involved individuals who were serving in designated combat zones during the tax year(s) at issue. What they didn’t realize is that the law extends the typical April 15th tax filing and payment deadline to six (6) months after the date of return from a designated combat zone (potentially even more, under certain circumstances). In other words, as long as they had filed and paid their taxes for the year(s) at issue within six (6) months of return from deployment, which they did, these clearance-holders had NOT “failed to file or pay taxes, as required…”.
Know Your Rights When Serving in a Combat Zone
The swift intervention of legal counsel resulted in these cases being dismissed, but not without the clearance-holders first incurring unnecessary legal fees and stress. If you’d like to avoid the same fate, and you’ve served or are serving in a designated combat zone, there are a few pertinent details to understand.
First, what constitutes a “designated combat zone” may be broader than you think. The IRS publishes a list, “Combat Zones for Approved Tax Benefits”, that outlines the currently applicable countries and regions. Some may not be particularly obvious for designation as current “combat zones”, but that’s because the term includes areas designated as supporting current combat efforts where individuals may still be subject to physical danger.
Second, it’s not just members of the Armed Forces who qualify for military tax benefits. Civilian federal employees and contractors serving in a designated combat zone can also take advantage of the same rules in many circumstances.
Go Straight to the Sources to Understand the Combat Zone Rules
Finally, don’t do what I see too many clearance-holders do: rely on the well-meaning but uninformed advice of someone who has been serving at their duty station longer and thus theoretically “knows the rules.” Instead, if you ever have questions about your taxes go straight to the source – the IRS or state tax authorities (which may follow different rules than the IRS) – or engage a Certified Public Accountant, Tax Attorney, or Enrolled Agent. Remember, the advice you’re getting is only as good as the qualifications of the person giving it. For more on this issue, see IRS Publication 3: Armed Forces’ Tax Guide and the IRS guidance hyper-linked above.
This article is intended as general information only and should not be construed as legal or tax advice. Consult an attorney or tax professional regarding your specific situation.