For many people, the last couple years have prompted a reassessment of what really matters. Family time, health, and work-life balance have all taken on greater meaning, resulting in a significant number of relocations out of expensive, fast-paced, and congested cities and into smaller towns and rural areas. The trend seems most pronounced among higher-paid workers, who, perhaps not coincidentally, are also the most likely to have remote work options available to them, according to a recent study by Payscale.com. More surprising, given handling and storage limitations surrounding classified information, may be the fact that many cleared workers are included among those eligible for remote work.
Eligible for Access
Contrary to popular lexicon, “security clearance” – or more accurately, eligibility for access to classified information – does not necessarily equate to access itself. Many U.S. government contracts and civil service positions require that an individual be adjudicated as eligible for access to classified information at a certain level, but only because of the sensitivity of the position. A “cleared” worker could theoretically work their entire career and never actually encounter classified information.
Similarly, many federal employee and contractor positions are designated as “sensitive national security positions” and require a favorable eligibility determination without actually affording access to classified information.
There are also some positions that require suitability or credentialing adjudications but afford no eligibility or access to classified information. The attendant background investigations are sometimes misconstrued by workers as resulting in “security clearance”.
Hybrid or Remote Work is an Option
In all of these instances, and even in some that require occasional access to classified information, fully remote or hybrid work is now a viable option in light of increasing employer acceptance and COVID-induced technology upgrades. But workers who dove into remote work headfirst early in the pandemic, especially those who moved out of state, are now finding that their exuberance may have come at the expense of due diligence. That’s because states vary dramatically on what income is taxed and at what rate.
Some of the most vexing tax-related security clearance problems we’re seeing these days include situations where workers have inadvertently subjected themselves to taxation in two states: where they live and where their employer is physically located. This is referred to in tax law as the “convenience” rule. Other scenarios that have played out recently in our practice include cleared workers who maintain their prior home as a rental property in a different state and those who split their time among multiple tax jurisdictions, including overseas locales or U.S. territories.
The tax implications of these situations can be extraordinarily complicated and should not be addressed without professional assistance from an accountant or certified tax preparer. On the security clearance front, however, the ultimate outcome is usually clearer. A failure to file or pay taxes as required, even if inadvertent, is reportable on the SF-86 form, and can cause problems for the clearance-holder.
Don’t Ignore Tax Problems
Fortunately, most of these cases are mitigatable with a showing of good faith and a demonstration that the problem is under control. That means all outstanding tax returns are filed, payment has been made (or a payment plan is in place), and remedial efforts have been undertaken to prevent recurrent problems (e.g., getting an accountant on retainer for tax time).
Security clearance situations involving complicated inter-state tax situations do typically differ from the more straightforward applications of tax law that any cleared worker should reasonably expect – but only to a point. Allowing tax problems to languish and snowball after you’ve become aware (or reasonably should have become aware) of them is a steeper hill to climb.
This article is intended as general information only and should not be construed as legal advice. Although the information is believed to be accurate as of the publication date, no guarantee or warranty is offered or implied. Laws and government policies are subject to change, and the information provided herein may not provide a complete or current analysis of the topic or other pertinent considerations. Consult an attorney regarding your specific situation.