Form 1040-C: U.S. Departing Alien Income Tax Return (2011)

What the Form Is For

Form 1040-C is a specialized tax document that certain non-U.S. citizens must file before leaving the United States. Think of it as a "tax clearance" form—essentially, the IRS's way of making sure you've settled your tax obligations before you depart the country. When you file this form and meet all requirements, you receive a certificate of compliance, also called a "sailing permit" or "departure permit," which proves you're square with Uncle Sam.

This form serves two main purposes: it reports all income you've received or expect to receive for the entire tax year up to your departure date, and it allows you to pay any tax liability on that income. The form applies to both resident aliens (those with green cards or who meet the substantial presence test) and nonresident aliens who have U.S.-source income or income connected to a U.S. trade or business.

Importantly, Form 1040-C is not your final annual tax return—it's a preliminary tax payment. You'll still need to file your regular Form 1040, Form 1040-NR, or Form 1040-NR-EZ after the tax year ends. Any tax you pay with Form 1040-C counts as a credit toward your final tax bill, and if you overpaid, you'll get a refund when you file your annual return.

When You’d Use Form 1040-C

Filing Timing and Requirements

You must file Form 1040-C before you leave the United States, not after. The IRS recommends applying at least two weeks before your planned departure but no earlier than 30 days in advance. This timing is crucial—you cannot get your sailing permit retroactively, and attempting to leave without one (if you're required to have it) can create serious problems.

There’s no "late" filing option because the form must be filed before departure.

Special Timing Rules for Early-Year Departures

If you're departing between January 1, 2011, and April 15, 2011, you must also file your 2010 annual return (Form 1040 or Form 1040-NR) and pay any tax due for that year before receiving your departure permit.

Amending or Updating Form 1040-C

The form cannot be amended like a regular tax return. If you receive additional income after filing Form 1040-C but before the year ends, you report it on your final annual return.

If you make multiple departures during the same tax year, you may be able to use the same departure permit for subsequent trips—unless the IRS determines that a later departure would jeopardize tax collection.

Corrections are generally handled on your annual return, not on Form 1040-C.

Key Rules or Details for 2011

Who Must File and Who Is Exempt

Not everyone needs to file Form 1040-C. Exempt individuals include:

Diplomatic passport holders and their families
Certain international organization employees with tax-exempt income
Students/exchange visitors on F-1, F-2, H-3, H-4, J-1, J-2, or Q visas with limited income
Vocational students on M-1 or M-2 visas
B-1/B-2 visitors staying fewer than 90 days
Canadian or Mexican residents commuting for work
Military trainees on official orders

When to Use Form 2063 Instead

Form 2063 is allowed if:

You had no taxable income for the current and preceding year, or
You are a resident alien whose departure won’t hinder tax collection.

Form 1040-C is required if you don’t qualify for Form 2063 or if the IRS believes collection is at risk.

Resident vs. Nonresident Rules

Resident aliens:

Report worldwide income
Can claim the same exemptions, deductions, and credits as U.S. citizens

Nonresident aliens:

Effectively connected income (wages, business income): taxed at graduated rates
Non-effectively connected income (dividends, certain interest): taxed at 30% or treaty rate
Can generally claim one personal exemption, except residents of Canada, India, Mexico, South Korea, and U.S. nationals

2011 Tax Amounts

Personal exemption: $3,700
Standard deduction: varies by filing status
AMT exemption:
- $48,450 (single)
- $74,450 (married filing jointly)

Step-by-Step (High Level)

Step 1: Gather Your Documentation

Collect:

Passport, visa
Past two years of tax returns
Wage statements, receipts, business records
Estimated tax payment receipts
Scholarship or treaty documents
Departure date evidence
SSN/ITIN verification

Step 2: Make an IRS Appointment

Schedule your IRS field office appointment at least two weeks before departure. Both spouses must attend if both are leaving.

Step 3: Determine Your Alien Status

Explain whether you are:

A resident alien (Group I)
A nonresident with effectively connected income (Group II)
A nonresident with non-effectively connected income (Group III)

Step 4: Claim Exemptions

Complete Part II for yourself, spouse, and dependents.

Step 5: Report Your Income

Use Schedule A to list all:

Current and expected income
Tax withheld
Income separated by residency/tax category

Step 6: Calculate Your Tax

Groups I & II: AGI → deductions → taxable income → apply tax rates
Group III: apply 30% (or treaty) rate

Include any additional taxes.

Step 7: Apply Credits and Payments

Subtract credits and include:

Withholding
Estimated payments

Determine if you owe or overpaid.

Step 8: Sign and File

Sign, pay tax due, and receive your Certificate of Compliance.

Common Mistakes and How to Avoid Them

Waiting Until the Last Minute

Delays in gathering documents or getting appointments can derail travel plans.

Assuming You’re Exempt

Visa category alone does not guarantee exemption.

Confusing Form 1040-C With Your Annual Return

Form 1040-C is prepayment, not your final return.

Misclassifying Resident vs. Nonresident Status

Visa type is not determinative—substantial presence and exceptions apply.

Failing to Report Expected Income

You must estimate full-year income, even after departure.

Missing Documentation

Any missing record can delay your permit.

Misreporting ECI vs. Non-ECI

Nonresidents must carefully classify income types to ensure correct tax rates.

What Happens After You File

IRS Review and Certificate Issuance

If everything is correct, the IRS signs the Certificate of Compliance—your departure permit.

Types of Permits

Form 2063-based permits: Valid for all departures in the year
Form 1040-C-based permits: Valid only for that specific departure

After Departure

You still must file your annual return:

Residents: Form 1040
Nonresidents: Form 1040-NR / 1040-NR-EZ
Dual-status: special rules apply

Tax paid on Form 1040-C becomes a credit.

Refunds are issued only with the annual return—not at departure.

Possible Expatriation Tax

Certain long-term green card holders may need to:

File Form 8854
Pay exit tax under §877A

FAQs

#### I'm a student on an F-1 visa with only a university stipend. Do I need Form 1040-C?

Likely not. Students on F-1 visas are exempt unless they had other U.S.-source income outside specific allowed categories. If your stipend fits the exempt categories, you don’t need the permit.

#### Can I file Form 1040-C after leaving the United States?

No. It must be filed in person before departure.

#### If Form 1040-C shows an overpayment, will I get a refund at the IRS office?

No. Refunds are issued only after your annual return is filed.

#### I’m a Canadian who commutes to work in the U.S. Do I need a departure permit?

No. Regular Canadian (and Mexican) commuters are exempt, but must still file annual U.S. tax returns.

#### I filed Form 1040-C months ago but didn’t leave. What now?

Your certificate is valid for the year unless revoked. File your annual return normally.

#### How do tax treaty benefits apply on Form 1040-C?

Treaty benefits apply the same as on annual returns. List exempt income on Schedule A, line 5, and provide treaty details.

#### I have a green card but haven’t lived in the U.S. recently. Do I need Form 1040-C?

Generally yes—green card holders are resident aliens for tax purposes. Expatriation rules may also apply.

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Checklist for Form 1040-C: U.S. Departing Alien Income Tax Return (2011)