Imagine, after years on the job, your company requires you to complete a routine background check. You know you have nothing to hide, so you complete the documents, sign them and get back to work.
Then, several months later, your boss calls you in his office to and explains the investigation has turned up “some problems”. Your boss has no details for you and the documents from the Office of Personnel Management (OPM) provide no details. All you have is a three-word response: “no determination made.”
Within weeks, with no further details provided to you, you find yourself fired and out of work in the middle of a recession.
Nearly five million Americans depend on government security clearances for their livelihood. Whether you are a federal employee or private contractor, keeping your security clearance is crucial to staying employed, and having an IRS tax lien presents a real roadblock to maintaining your clearance and staying gainfully employed.
The easiest way to lose your clearance is to fail a threat assessment hearing. Threat assessment comprises strategies or pathways used to determine the credibility and seriousness of a potential threat, as well as the likelihood that it will be carried out in the future.
Security clearances are currently reviewed on average every five years. After the recent disclosures about apparent casual security reviews of Edward Snowden and others, many anticipate security reviews will soon be enhanced and become more frequent. This spells real trouble for those with tax problems.
A study of the Defense Office of Hearing and Appeals (DOHA) security clearance hearings from 2007 showed that almost 50 percent of clearance denials involved debt. There are 13 different guidelines used to issue a security clearance, covering drug abuse, alcohol consumption, personal conduct, sexual misbehavior, psychological condition — and many others. We are going to focus on Guideline F, “Financial Considerations” shown here.
The commonly held belief is excessive indebtedness increases the temptation to commit unethical or illegal acts in order to obtain funds to pay off debts. Many who have betrayed their country did it for financial gain — caused by a combination of either a real or perceived urgent need for money, or simple greed.
Of the 13 Adjudicative Guidelines, Financial Considerations — Guideline F — has had more cases examined than the other 12 guidelines combined. The majority of Guideline F cases can be boiled down to one over-riding security concern—delinquent debt. High debt to income ratio and excessive indebtedness are listed as a potentially disqualifying condition, but this rarely comes into play absent any past or present delinquent debt or obvious signs of unexplained income. Low credit scores are not listed as a potential disqualifying condition, because factors unrelated to debt affect credit scores.
As I’ve previously mentioned, delinquent debt is by far the most common financial concern and the leading cause of failed threat assessments. In adjudicating these cases the DOHA considers these factors:
- Cause of debt
- Response to debt
- Amount of debt
What caused your debt is looked at much more closely than the amount of debt, because it speaks to a person’s reliability, trustworthiness, and judgment. Fifty percent of people who seek credit counseling are there due to irresponsibility, and if the debt was caused by reckless behavior that is likely to continue, the problem is magnified. However, if the debt occurred due to situations beyond the applicant’s control and the applicant is handling the debt in a reasonable manner (including bankruptcy or debt consolidation), the significance of the problem is substantially reduced.
Response to debt is evaluated by the things people do (or don’t do) about delinquent debt. How people deal with debt is often defines the outcome of a hearing or an appeal. The DOHA is of the belief that those who ignore their financial responsibilities may also possibly ignore their responsibility to safeguard classified information. Classic indicators of irresponsibility and unethical behavior are:
- Relocating without notifying creditors of your new address
- Failing to take reasonable measures to pay or reduce debts
- Knowingly issuing bad checks
- Increased credit card use immediately before filing bankruptcy
The words, “bankruptcy” and “credit counseling” do not appear anywhere in the Adjudicative Guidelines. The DOHA views both counseling and bankruptcy as positive efforts to get one’s finances under control. The weight falls on the underlying reason for the bankruptcy or credit counseling.
Amount of debt focuses primarily on the delinquent amount, but if your total debt appears excessive, it may also be taken into consideration. Significant delinquent debt is a security concern. Basically, if an individual’s minimum monthly payments for consumer credit (excluding credit cards that are paid in full at the end of each billing cycle and mortgages on primary homes) totals more than 20 percent of monthly take-home pay, there is a financial problem. The OPM does not automatically expand investigations for financial issues, unless:
- Credit report reflects current aggregate delinquent debt totaling $3,500 or
- Bankruptcy within the past 2 years or
- Bankruptcy within the past 3 to 5 years with evidence of current credit problems.
This does not mean that delinquent debt totaling less than $3,500 is not significant, but it does suggest that, if there are no other significant security issues, the government is not overly concerned about small amounts of delinquent debt. OPM considers bankruptcy only as a trigger for further inquiry.
How to Avoid Liens
- First, always file your returns even if you can’t pay them. Even if you can’t pay, timely filing eliminates failure to file penalties.
- If you can borrow the money, borrow it and pay your due taxes.
- Get a free credit report from all three credit agencies each year at Myscore.com. Examine each report for obvious errors and make sure all accounts listed on the reports belong to you. If you determine an account is not yours, file a police report for identity theft specifying the suspect account. Keep a copy of the police report. Notify the creditor in writing to inform them the account does not belong to you. Also notify each credit agency in writing any suspicious accounts.
- Pay at least the minimum due each month on all of your debts and put any extra money toward debts with the highest interest rates.
- Don’t stop paying one debt to save enough money to pay off another.
- Don’t continue to spend on a credit card that you are trying to pay off.
If you get a lien, remember, paying the amount due does not remove the lien. Where security clearance purposes are concerned, the difference between a lien withdrawal and a lien release is critical. A release still stays on your record and shows you had serious financial problems.
If you need help with back taxes but don’t have an IRS lien, receive tax lien help before entering into a payment plan. Generally, the IRS is flexible about not filing liens if you can make regular payments. They also understand you cannot make payments if you lose your job. Make sure to document everything that happens and all correspondence in writing.
My Tax Help MD provides the best IRS tax help and tax settlement services and make the life of its clients easy and relaxed. Having a team of professional tax consultants, we provide diverse IRS tax debt resolution service. You can tell us your tax problems and we will come up with the best possible solutions for them.