DHS Denies Citizenship to Applicants on IRS Payment Plans

US Citizenship and Immigration Services has denied naturalization applications over IRS payment plans and filing extensions, immigration attorneys said, tightening USCIS citizenship tax compliance checks in November 2026.

The Department of Homeland Security agency is treating late payment of tax as evidence against an applicant’s “good moral character”, the test every would-be citizen must meet. Attorneys said an installment agreement with the IRS used to count in an applicant’s favour. Several now say it is the stated reason for refusal.

For accountants and enrolled agents, the change reaches an ordinary part of client work. A Form 4868 extension and an IRS payment plan are routine tools, and neither carries a conviction or an IRS sanction. Practitioners advising green card holders now have a new risk to explain before a client files for citizenship.

What USCIS citizenship tax compliance now means

Tax payments came under sharper review after a USCIS policy memorandum issued in August 2025. It told USCIS officers reviewing citizenship applications to take a “holistic” approach to good moral character, weighing community involvement, educational background and compliance with tax obligations.

Before the memo, attorneys said, tax records were not used against an applicant unless there was a tax-related charge or conviction. The USCIS Policy Manual says an immigrant who fails to file or fully pay taxes may be precluded from meeting the standard. Its examples involve denials after convictions for tax evasion and conspiracy to defraud the government.

The new denials rest on far less. Attorneys said applicants have been refused solely for being on a payment plan or for requesting a filing extension and not paying by the deadline.

The shift comes as naturalization rates fall in President Donald Trump’s second term. Applicants who once passed the test by showing no negative marks now face a demand for affirmative evidence.

Denials cite an “unlawful act” for late tax payment

The rejection notices describe failure to fully pay tax obligations as an “unlawful act”. Several add that the applicant did not show extenuating circumstances for paying late.

Lily Axelrod, an immigration attorney in Memphis, said a client was denied last month, shortly after the client’s husband took the citizenship oath. The notice said the filing extension and failure to pay on time was “an unlawful act that adversely affects your moral character”.

“She’s not had a single immigration violation,” Axelrod said. The attorneys said that language is typical in recent denials, including for applicants with no criminal record and no IRS sanctions.

The pattern is not confined to a few offices. Eric Welsh, a partner at Reeves Immigration Law Group, said each of the 12 attorneys at his firm has received a similar decision involving extensions or payment plans.

“Those do not per se indicate that a person lacks good moral character,” Welsh said. He called the standard “fuzzy”.

Sal Macias, an attorney in Phoenix, said a green card holder of nearly 40 years was approved for an oath ceremony. The documents show the client was then denied for being on a payment plan. The client has chosen to wait a few more years before applying again.

Kathleen Campbell Walker, immigration practice group chair at Dickinson Wright PLLC, described a client married to a US citizen who was denied because of the spouse’s payment plans with the IRS. The policy memo states that such agreements should not be treated as an adverse factor, she said.

The tax rules behind the denials

The IRS draws the line USCIS is now policing. A filing extension on Form 4868 moves the filing deadline to October 15 but, in the IRS’s words, “is only for filing your return”. Tax owed is still due in April, and paying late brings a civil penalty.

That is a common misunderstanding among clients. Applicants who requested an extension and did not pay an estimate by the deadline are among those being refused.

An IRS installment agreement is a sanctioned arrangement. Individuals who owe $50,000 or less in combined tax, penalties and interest and have filed all required returns can apply online for a long-term plan. A short-term plan of 180 days or less is open to those who owe less than $100,000.

Interest and some penalty charges keep accruing until the balance is paid in full. A plan generally bars IRS levies while it is pending or in effect. It is a way of complying with the tax code, not of breaching it.

Michelle Marty Rivera, an immigration and tax lawyer in Miami, said “USCIS is being more harsh than the IRS itself”. The IRS did not respond to a request for comment.

USCIS defends its tax compliance reviews

The administration defended its authority to look at every factor. Zach Kahler, a USCIS spokesman, set out the agency’s position on citizenship tax compliance.

“Ensuring tax compliance is a long-standing legal requirement this administration will not overlook.”

Zach Kahler, spokesman, U.S. Citizenship and Immigration Services

Lora Ries, director of the Border Security and Immigration Center at the Heritage Foundation, backed the change. She said good moral character had been a “low hurdle to clear” in which officers looked for negative marks. “You need to show evidence of good moral character,” Ries said. “It’s not just, we don’t find anything negative.”

Critics say that logic does not reach payment plans. Doug Rand, a former senior USCIS official, said citing IRS agreements in denials goes well beyond the intent of the immigration statute and agency regulations. He predicted attorneys would win appeals.

“Previously the immigration system tried to reward people for participating in the tax system,”

Sarah Krieger, senior policy counsel, National Immigration Law Center

Krieger said refusing citizenship on that one factor alone “would violate not just the statute and regulation, but their own recent policy”.

Shev Dalal-Dheini, senior director of government relations at the American Immigration Lawyers Association, said USCIS officers lack training in tax law. She said the scrutiny is another way to stifle naturalizations.

What USCIS citizenship tax compliance means for practitioners

The evidence so far is attorney-reported rather than statistical. USCIS has published no count of tax-related denials, and the attorneys quoted describe cases from their own caseloads. What they describe is consistent: similar wording in the notices, across several cities and firms.

For preparers, the practical exposure sits in the months before a naturalization filing. A client who extends on Form 4868 should pay an estimate of the tax owed by the April deadline, since the unpaid balance is what the denial notices target. Clients on installment agreements should keep the IRS approval letter and payment history ready for their immigration counsel.

Spouses matter too, if Walker’s account holds. A household payment plan in one partner’s name can surface in the other’s case.

Firms with immigrant clients may want to track extension filings and plan balances in tax and compliance software, and flag any client who has mentioned a citizenship application. The practice is a response to the current denials, not a requirement of any rule.

The question of tax status in immigration is not new at the IRS either. The agency has been drawn into related questions, including a proposed citizenship question on the 2026 Form 1040 and pressure over its tax gap estimate. The agencies are asking different questions of the same taxpayers.

Rand predicted attorneys would succeed on appeal, though he said the agency’s political leadership did not care about the cost. The test will be whether denials based on payment plans and extensions survive review, and whether USCIS revises the memo or the Policy Manual to say so.