Emerging Trends in Naturalization Cases

By: Jagan Tamirisa | November 5, 2026

Noticing Increasing Scrutiny of Tax Compliance in N-400 Cases

Recent reports across the United States suggest increased scrutiny by U.S. Citizenship and Immigration Services (USCIS) of applicants' federal and state tax compliance when evaluating applications for naturalization (Form N-400).

Of particular concern are reports of N-400 denials involving applicants who have entered into installment agreements with the Internal Revenue Service (IRS) and are making payments as scheduled. Other reports involve applicants who obtained valid extensions of time to file their tax returns but submitted those returns after the traditional April 15 deadline.

These reports warrant attention as they raise an important legal question: Can USCIS deny an N-400 application based solely on tax-related issues, even when the applicant has filed all required returns and is complying with an authorized IRS installment agreement?

The answer requires a careful examination of the Immigration and Nationality Act (INA), applicable federal tax laws, USCIS regulations and policy, and existing federal court decisions.

The Statutory Good Moral Character Requirement: USCIS's Renewed Focus on Good Moral Character

An important policy development occurred on August 15, 2025, when USCIS issued Policy Memorandum PM-602-0188, titled "Restoring a Rigorous, Holistic, and Comprehensive Good Moral Character Evaluation Standard for Aliens Applying for Naturalization." The memorandum directs USCIS officers to undertake a comprehensive evaluation of an applicant's good moral character, looking beyond the mere absence of criminal convictions or other disqualifying conduct. Officers are instructed to consider both positive or negative factors, including, among other things, the applicant’s compliance with tax obligations and financial responsibility in the United States.

The express inclusion of tax compliance and financial responsibility as factors in evaluating good moral character is particularly relevant considering the emerging reports of tax-related N-400 denials.

INA Section 316(a) requires naturalization applicants to establish a good moral character during the applicable statutory period. For most applicants, this period is five (5) years preceding the N-400. USCIS may also consider relevant conduct occurring before the statutory period when assessing an applicant’s present good moral character. Accordingly, prior tax delinquencies may remain relevant, particularly where the noncompliance continued into the statutory period or otherwise bears on the applicant's present character.

The USCIS Policy Manual states: "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 Good Moral Character". This provision provides the basis for USCIS to scrutinize applicants with outstanding tax liabilities.

The Importance of Accurate Tax Disclosures

This trend underscores the importance of accurately disclosing tax-related information on Form N-400 and providing truthful responses during the naturalization interview. Any inaccurate, incomplete, or misleading representation concerning tax filings or outstanding liabilities may adversely affect the application and potentially raise additional concerns regarding the applicant's credibility and good moral character.

When an N-400 applicant has outstanding tax issues, it is important to distinguish between an isolated error or discrepancy in a tax return and a broader pattern of tax noncompliance. For example, an applicant who has consistently filed required returns and complied with an IRS installment agreement is in a materially different position from an applicant who has repeatedly failed to file returns, failed to pay required taxes, or disregarded prior payment obligations. The nature, extent, and circumstances of the tax issue should therefore be carefully evaluated.

Under 26 U.S.C. § 6081, federal tax law authorizes extensions of time to file returns. Accordingly, an applicant who obtains a valid filing extension and submits the return within the extended deadline has not filed late merely because the return was submitted after the original April filing deadline. The use of legally authorized filing extensions does not, standing alone, establish tax noncompliance or a lack of Good Moral Character.

USCIS's own Form N-400 instructions expressly contemplate circumstances in which an applicant has outstanding federal, state, or local tax liabilities and has arranged to repay those obligations. The instructions identify an executed repayment agreement and evidence of the current status of the repayment program as relevant supporting documentation. Thus, the existence of an outstanding tax balance, particularly where the applicant has entered into and remains compliant with an authorized installment agreement, should not automatically establish a lack of good moral character. The applicant's overall tax compliance history, the circumstances giving rise to the liability, and the status of repayment remain relevant to the individualized assessment.

The burden of proof in N-400 proceedings rests with the applicant, who must establish eligibility for citizenship in every respect, including good moral character. Accordingly, applicants should proactively provide documentary evidence demonstrating their compliance with applicable tax obligations and any established payment arrangements.

Practical Considerations for N-400 Applicants

The recent reports suggest that tax compliance is receiving increased attention in N-400 adjudications. A comprehensive tax-compliance review should therefore become an integral part of pre-filing N-400 screening, and applicants with outstanding tax liabilities should receive individualized legal analysis before filing. Particular attention should be given to applicants with multiple business interests, as they may face additional scrutiny concerning personal and business tax returns, income reporting, outstanding liabilities, and discrepancies between reported income and IRS records. Applicants whose N-400 applications are denied on tax-related good moral character grounds should carefully evaluate the specific reasons stated in the denial notice and consider available administrative or judicial remedies.

How CHUGH LLP Can Assist

CHUGH LLP offers integrated U.S. immigration and tax services through its team of experienced Certified Public Accountants (CPAs) and immigration attorneys. We assist individuals and businesses with naturalization and citizenship matters, tax compliance, tax planning, IRS representation, and resolution of outstanding tax liabilities. Our integrated legal and tax capabilities enable us to address immigration-related tax concerns and provide coordinated guidance.