When Tax Issues Affect One’s Ability to Naturalize (Become a U.S. Citizen)
To be eligible for naturalization (the process of obtaining U.S. citizenship), a lawful permanent resident must show “good moral character” for the five years preceding the naturalization application. Good Moral Character (“GMC”) encompasses conduct beyond simple an absence of criminal behavior. The most common non-criminal GMC problems we see are failure to pay child support and failure to pay taxes. This “tech tip” will discuss how USCIS approaches tax issues when evaluating naturalization applications.
USCIS’s Traditional Approach to Tax Issues and Naturalization
Traditionally, USCIS took the following approach. If you ever failed to file taxes or ever owed taxes, most officers would then request tax transcripts for the full GMC five-year period. Some officers would request the 5 years of tax transcripts even if the violation (failure to file or pay taxes) occurred beyond five years.
Next, the officer would determine if the violation had been fully cured; namely, had all taxes now been filed and had all amounts owed been paid. If a tax return had still not been filed in the last five years, the applicant would be unable to show the required GMC. However, in the event that the person had filed all taxes and was current on a payment plan, USCIS would generally accept this as sufficient to establish GMC.
New USCIS Policy Manual Guidance on Tax Issues and Naturalization
USCIS recently updated their guidance on how tax issues affect GMC. This new guidance suggests that USCIS will be stricter on tax violations during the 5-year GMC period. (See below for the full text of this new guidance.)
Under the new guidance, USCIS first asks the somewhat ambiguous question when a person has failed to file or pay taxes: Does the conduct “violate the standards of an average member of the community.” If the officer decides that it does not, the applicant must then show that the error or problem has been corrected or is being addressed; namely, the error has been fully corrected or if the violation was a failure to pay, then the person is making payments in accordance with the payment plan.
The language of the new guidance is disturbing because it implies that being up-to-date on a payment plan is no longer necessarily sufficient to qualify for naturalization. This is because the officer must first determine whether the reason for owing violates the standards of an average member of the community. If the officer decides that the conduct does violate the standard of an average member of the community, then even correcting the violation is insufficient to establish GMC. If the officer determines that the violation did not violate this community standard, then a person may be able to remedy the problem and establish GMC.
An officer makes this initial determination by looking into why the person owed taxes: Was it for a technical reason such as a business owner not fully understanding tax liability after a complicated deal? Or, did the person simply fail to file and pay taxes?
This new guidance begs the following question: if you simply failed to file taxes during the period, but since have corrected this and now are up-to-date on a payment plan, are you eligible for naturalization? Before, we would have advised that USCIS is very likely to approve your case, but now, we are proceeding more cautiously. Namely, it is important to look at the violation and payment plan more closely, and ask the following questions:
- How much was the original, total debt? More is bad.
- How much do you still owe? If you have paid off little of the debt, that of course is also a negative factor.
- How bad was the violation: As discussed, was it simple a failure to file and pay taxes (not good), or was the violation more understandable because of a complex rule that was not fully understood?
Unfortunately, the new rule creates some murkiness for applicants who have committed a tax violation in the last five years. At the end of the day, USCIS still has a fair amount of discretion on this issue, even when a person is up to date on a tax payment plan.
When a person has a tax violation since becoming a permanent resident, particularly when that violation occurred and/or has not been corrected in the last five years, it is important to consult with a good immigration lawyer to evaluate your eligibility. Denial of naturalization applications based on tax violations is one of the most common denials we see. We are happy to help: Reach out to us at 303-872-6985 to chat with an attorney and potentially set up a full consultation.
Failure to File Tax Returns or Pay Taxes in Accordance with Tax Authority
An applicant who fails to file tax returns, if required to do so, or fully pay his or her tax liability, as required under the relevant tax laws, may be precluded from establishing GMC. If there are inconsistencies between the record and the applicant’s tax returns, the applicant may be precluded from establishing GMC due to the commission of an unlawful act. Once the failure to file tax returns or pay taxes and the relevant law has been identified, the officer must assess on a case-by-case basis whether the applicant is ineligible for naturalization under the unlawful acts provision. If the officer determines that the unlawful conduct violates the standards of an average member of the community, the applicant will not be able to establish GMC. However, recognizing the complexities of filing taxes, there may be instances where the officer may determine that the applicant’s conduct regarding his or her tax return or tax payment did not violate the standards of an average member of the community, or that the applicant established extenuating circumstances. In such cases, GMC may be established by the applicant showing that he or she has corrected all inconsistencies or errors. An example of when an applicant may not be prevented from establishing GMC despite filing taxes incorrectly could be where the applicant is divorced and mistakenly claimed a child as a dependent on his or her tax return for a tax year that the former spouse was entitled to claim the child as a dependent based on the terms of the divorce.
Examples of corrections of such inconsistencies or errors might include a letter from the tax authority to evidence indicating that:
- The applicant has filed the appropriate forms and returns; and
- The applicant has paid the required taxes, or has made arrangements for payment and is doing so in accordance with the pertinent tax authority