US green card applications face new tax scrutiny; unpaid dues could affect approval and US citizenship

The US Citizenship and Immigration Services (USCIS) has adopted a stricter approach to green card applications, with unpaid taxes, unfiled returns and outstanding tax payments potentially counting against applicants during the approval process. The policy requires immigration officers to look beyond basic eligibility conditions and examine an applicant's overall circumstances before deciding whether to grant permanent residence.

The change follows a policy memorandum issued by USCIS in May 2026, which treats adjustment of status (AOS) as a discretionary benefit. Adjustment of status is the process through which eligible foreign nationals already in the US apply for a green card without having to leave the country.

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Under the revised approach, meeting the basic requirements for a green card may not be enough. Officers must weigh positive and negative factors, including an applicant's compliance with tax laws, before making a decision. The approach could affect people applying for permanent residence through family sponsorship or employment, as well as US citizens sponsoring relatives.

Unpaid taxes could affect green card approval

Immigration lawyers have warned that applicants with unpaid federal, state or local taxes could face difficulties under the revised policy. This may include people who have not yet filed their tax returns because they have obtained an extension, as well as those who are paying outstanding taxes in instalments under a repayment agreement with the Internal Revenue Service (IRS) or a state tax authority.

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Karin Wolman, a New York-based immigration attorney, has advised people preparing to apply for adjustment of status to review their tax records and settle outstanding liabilities before filing their applications.

"As the policy memo reframes AOS as a rare discretionary benefit, USCIS officers have been routinely denying cases in situations that used to be acceptable. One of these is where the applicant or sponsoring US citizen owes back taxes: if you haven't filed a return yet because it's under extension, or you are making partial payments under a payment plan with the Internal Revenue Service (IRS) or the state, that can now result in denial of a green card application. Get your house in order, file the tax return and pay the balance owed. It is best if you can do so before filing the application, but definitely before the interview," she said.

The policy also has implications for US citizens sponsoring their family members for green cards. Such sponsors are generally required to submit an Affidavit of Support to demonstrate that they have sufficient financial resources to support the relative they are sponsoring. Tax returns and payment records are among the documents used to establish their financial position. Outstanding tax liabilities could therefore become an issue during the assessment of these applications as well.

Tax compliance can also affect US citizenship

The stricter approach is not limited to people applying for permanent residence. Tax records can also become important when green card holders apply for US citizenship through naturalisation. Applicants must generally demonstrate good moral character as part of the citizenship process, and USCIS considers failure to meet tax obligations a negative factor when assessing this requirement.

People with overdue federal, state or local taxes may be asked to provide proof that they have filed the required returns and entered into a repayment agreement with the relevant tax authority. This means that obtaining a green card does not necessarily end the scrutiny of an individual's tax compliance when applying for a more permanent immigration status.

Wolman also highlighted the connection between tax payments and citizenship applications. "Timely payment of taxes is also a good moral character factor when applying for naturalisation," she said.

Legal challenge against the policy

The revised approach is facing a legal challenge in the US. A coalition of immigration advocacy organisations, unions and individual applicants filed a lawsuit against the Department of Homeland Security and USCIS in a district court in Massachusetts on October 5, 2026.

The plaintiffs argue that the policy violates the Administrative Procedure Act, the Immigration and Nationality Act and constitutional due process protections. They have asked the court to issue an injunction blocking the policy while the case is being heard. The case remains pending, and no court order has been issued to block the policy as of the latest update provided.