Ever have that “oh ■■■■” moment when it comes to reporting requirements? Yeah, many others on ClearanceJobsBlog have too, and this one is related to not claiming four years of side hustle income to the IRS:
I’ve filed and paid taxes for all my career w2 jobs for my entire life. The last 4 years I’ve been pretty consistently working on cars and never claimed or reported the income, it started with friends then friends of friends etc etc, and honestly never thought anything of it. Making myself hyper paranoid about my BI, had the “oh ■■■■” moment and curiosity got the best of me, and I made an average of $5k net each year, for the last 4 years. I didn’t even consider this until after doing my sf86, I saw the tax question and hit no without a second thought as leaving my old job for this one and doing the sf86 was so stressful. I plan on meeting with my CPA next week to get this all filed and corrected, luckily I have the savings to make any payment I would owe, what’s the correct way to approach this with my interviewer?
Not reporting side hustle income can jeopardize security clearance because the U.S. government views tax evasion and financial dishonesty as major security risks under Guideline F: Financial Considerations.
This is absolutely something to bring up proactively with the investigator rather than wait for them to discover it. The SF-86 specifically asks whether, during the last seven years, you failed to file or pay taxes when required, so the four years of unreported self-employment income potentially changes the answer you gave.
The encouraging part is that clearance adjudication isn’t simply “unpaid taxes = clearance denied.” What matters considerably is the surrounding conduct and what you’ve done about it. When the investigator gets to finances, or even near the beginning when they ask whether anything needs to be corrected, I’d say something along these lines:
“There’s something on my SF-86 that I need to correct. After submitting it, I realized that my answer to the tax question wasn’t accurate. For approximately the last four years, I’ve done automotive work on the side. It started informally with friends and eventually expanded through referrals. I estimate I netted about $5,000 per year from it, and I did not report that income on my tax returns. When I completed the SF-86, I answered ‘No’ to the question about failing to file or pay taxes because I didn’t connect the side work with that question at the time. Afterward, I realized the mistake. I’ve scheduled an appointment with my CPA to amend/correct the appropriate returns and determine exactly what I owe, and I have the funds available to pay the taxes, penalties, or interest that are due. I wanted to disclose this to you and correct my SF-86 answer.”
I’d avoid saying “I never thought anything of it” repeatedly, because an investigator could reasonably ask why someone earning roughly $20,000 over four years didn’t realize there might be a tax obligation.
Also be ready for the investigator to separate this into two issues: the underlying failure to report/pay taxes and the inaccurate SF-86 answer. For example, on the defense side, DCSA explicitly warns that withholding, misrepresenting, or falsifying information can affect clearance eligibility, while investigators use the interview specifically to verify, expand upon, and clarify SF-86 information. That’s why voluntarily correcting the answer matters.
Before the interview, I’d get as far into the remediation process as reasonably possible. Bring documentation showing the CPA appointment and, once available, amended returns, calculations, payment receipts, or an IRS/state payment arrangement.
For a Q clearance, your sponsoring DOE agency ultimately makes the eligibility determination, so nobody outside that adjudication can promise you an outcome. But from a clearance-strategy standpoint, I’d much rather see an applicant walk into the interview saying “I realized I made a mistake, here’s what it was, and here are the concrete steps I’ve already taken to fix it” than have an investigator uncover the discrepancy and then ask why it wasn’t disclosed.
And I wouldn’t wait until next week’s CPA appointment to decide whether you should notify your security office. This is one of those situations where the cleanup and candor from this point forward are extremely important.
Much about the clearance process resembles the Pirate’s Code: “more what you’d call guidelines than actual rules.” For this reason, we maintain ClearanceJobsBlog.com – a forum where clearance seekers can ask the cleared community for advice on their specific security concerns. Ask CJ explores questions posed on the ClearanceJobs Blog forum, emails received, and comments from this site. This article is intended as general information only and should not be construed as legal advice. Consult an attorney regarding your specific situation.
