I am in the process of renewing my secret security clearance for continue military service. I have not filed state taxes since my first year in the military. I was initially informed by a specialist in my states Department of Revenue that military members were not required to file because military pay is exempt from taxes in said state. I completed my e-Qip and answered “no” to the question inquiring about failure to file taxes when required. To the best of my knowledge I was not required to file. I was recently informed, after submitting, that the question of filing state taxes for military members in my state of residence is a gray area. Guidance for filling out the state’s version of the form 1040 say that filing in required for all residence that are also required to file a federal form 1040. Personnel at the state’s Department of Revenue contradict the guidance. To attempt to reconcile this issue and be on the safer side of things I have filed all missing state returns and confirmed that I do not owe the state, nor does the state owe me. Should I be concerned?
I would say that you should not be concerned. When you answered “yes” on your forms, you had good reason to believe that the advice you had been given was reliable. It did, after all, come from the state’s DoR. You would think that they would know.
It sounds like your state’s tax laws, no surprise, contain some ambiguity. Remember, some taxpayers collecting military pay may have other income. Either through a spouse on a joint return, a second job, a year that is mixed between private employment and military, business income or even income from trusts, interest or dividends. In most states, if you have only nontaxable income, there is no need to file. Although you can. It may be that your state has a technical requirement to file, because you filed a federal return, but doesn’t enforce that requirement when you have no income subject to state taxes.
In the family tax office where I work, we often go ahead and file state returns that would appear unnecessary, such as yours. I go in and remove the charges for the state return and file it for nothing simply as a record.
If there were some way for you to contact me outside of these boards, I would be happy to research your particular state but I understand if you don’t want to provide the information to do so here.
Taxes and drivers licenses are just two gray areas for military members.
I enlisted in California. I had the benefit of folks that were in the military and knew the rules. I only had to pay California income taxes when I was stationed in the state or TDY more than 30 days. I was required to file income tax forms every year, regardless of my location.
If you don’t know, write to to your home state tax agency about your situation and request a written reply. This solves many issues for you. It shows you are trying to fix any problems you may/may not have. Also, you have documentation (which investigators and adjudicators love) if the state tax agency changes their mind.
Be mindful, if the state tax agency says you have to file/do XYZ, don’t procrastinate - do XYZ.
Thanks for the response. I have already filed the missing returns, even though the DoR from my state told me that I am not showing delinquent for failure to file because I am military. I did find (after a ton of research) that the state does send of “Notice of Failure” to file, when they believe you are required to file and have not done so. I have verified with them that there has never been one issued for me. It just worries me because I answered “no” to the question. I have notified my security personnel in writing stating my concern and have kept a copy for my records. I’m hoping that I’m just over reacting.
I believe, after much research, that the requirement to file a state return is technical, but not enforced. I’m hoping that the lack of enforcement is in my favor. I have found that financial concerns may be mitigated if efforts have been made to resolve the issue. By me filing all returns, the issue in it’s entirety has been resolved.
If you have the department of revenue’s response in a letter - you are in a good place.
Don’t over think or try to squeeze the SF 86 questions to fit a situation.
The question reads, “In the past seven (7) years have you failed to file or pay Federal, state, or other taxes when required by law or ordinance?”
Who informed you of that? Your state official? As @backgdinvestigator said, dont sweat it too much… you should be fine… In case for your subject interview, I would recommend you to document the conversation you had with the Dept. of Revenue specialist. If possible, search and print state document that says military is exempt from filing. So, when you meet with a background investigator, you can simply show those documents to the investigator.
I will be reaching out the the state DoR tomorrow to see if they can provide me with something in writing. I was told by a representative on Friday that they would make a “note” in my account indicating that I as previously provided with misleading information on the requirement to file. My wife thinks that I’m over reacting a bit, but I would hate for something like not filing state taxes to be the thing that ends my career.
Thanks. I did document the conversation. Unfortunately there is no publication stating that military are exempt from filing, only that military pay is exempt from being taxed. The specialist I spoke with indicated that my account did not show delinquency or required action, though I had not filed. She also highlighted that it is gray area for them. She further stated that the only time that it would become an issue is if I had pay other than military or if I was actually stationed in said state and my dependent earned income. My SF86 has already been submitted, I’m crossing my fingers and hoping for the best at this point.
Actually, filing tax is not necessarily mandatory, especially if you do not expect to owe the government. The government most CERTAINLY isn’t going to make you file tax returns if you are due for refund. So, find where it says military pay is exempt, then print it for your reference.
Also, There should be a transcript or something like that, which you can save a copy for your record. Or something “official” that shows that your are not in delinquent with the state tax. Maybe the specialist will be able to print and send you a copy for your record.
By the way, the investigator more likely than not will ask you for the name of the specialist.