Form 1040-C (2011): Departing Alien Income Tax Return—Checklist
Year Context for 2011
Form 1040-C for 2011 is used by departing aliens filing an interim certificate of compliance covering partial-year income through the departure date, which does not function as a final tax return. The form distinguishes three distinct taxpayer groups, each subjected to different deduction and exemption rules based on their alien residency status and income connection to a U.S. trade or business.
The personal exemption amount for 2011 is $3,700 per exemption claimed. The Alternative Minimum Tax exemption is $48,450 for single filers or $74,450 for married couples filing jointly. No stimulus payment reconciliation, Affordable Care Act shared responsibility payment, or Tax Cuts and Jobs Act provisions apply to this form and year combination, as these programs were enacted in later years or do not apply to departing alien returns.
Form Characteristics for 2011
Form 1040-C for 2011 distinguishes three filer groups with different tax treatment limitations. Group I consists of resident aliens who may claim the same exemptions and deductions as U.S. citizens and are taxed on worldwide income. Group II consists of nonresident aliens with effectively connected U.S. trade or business income who may claim one personal exemption and only deductions connected to the U.S. trade or business. Group III consists of nonresident aliens with unconnected income who claim no exemptions and are subject to a flat 30% tax rate or a lower treaty rate if applicable.
Required schedules include Schedule A for income reporting by category, Schedule B for capital gains and losses, Schedule C for itemized deductions, and Schedule D for tax computation, including Alternative Minimum Tax calculated on Form 6251 if applicable. Form 1040-C cannot be filed electronically and must be filed in person at an IRS office at least two weeks before departure to allow for processing time.
The Certificate of Compliance, commonly known as a sailing permit, is required unless the filer qualifies for an exception such as diplomatic status, student or exchange visitor status on specified visa types with limited income, or resident alien status with no tax collection risk. This form is explicitly not a final income tax return; the filer must file Form 1040, Form 1040-NR, or Form 1040NR-EZ after the tax year ends to report all income and finalize tax liability.
Ten-Step Checklist
Step 1: Determine Alien Residency Status and Filing Group
Determine whether you are a resident alien or a nonresident alien for tax purposes. Resident alien status is established through the green card test if you were a lawful permanent resident at any time during 2011, or through the substantial presence test requiring at least 183 days of presence during the current and prior two years using the weighted formula, unless you qualify for the closer connection to a foreign country exception.
Within resident or nonresident status, determine if you are Group I (resident alien taxed on worldwide income), Group II (nonresident with effectively connected U.S. trade or business income), or Group III (nonresident with unconnected income). Resident aliens are taxed on worldwide income similar to U.S. citizens, while nonresidents are taxed only on U.S.-source income and income effectively connected with a U.S. trade or business.
Step 2: Verify Filing Requirement and Exceptions
Ensure that you are not exempt from the Form 1040-C filing requirements. Exceptions include diplomatic passport holders with A or G visa status who are employees with tax-exempt status under applicable treaties; students and exchange visitors on F-1, F-2, H-3, H-4, J-1, J-2, or Q visas with no U.S.-source income outside specified categories; M-1 or M-2 vocational students; B-1 or B-2 visitors present fewer than 90 days in the United States; and Canadian or Mexican residents commuting daily or weekly for work in the United States.
Suppose you are exempt from filing Form 1040-C and have no taxable income for the current year through the departure date and the preceding tax year. In that case, you may file Form 2063 (U.S. Departing Alien Income Tax Statement) instead to obtain your sailing permit without paying departure tax.
Step 3: Gather Income Documentation
Collect all Forms W-2 showing wages and withholding, all Forms 1099 showing interest, dividends, rental income, and other income types, capital gains and losses records with purchase and sale dates and amounts, self-employment income statements, and documentation of expected income through your departure date.
Include receipts and records proving income amounts and taxes already withheld at the source. For effectively connected income in Group II, separately identify all U.S.-source business income and income connected to a U.S. trade or business. For unconnected income in Group III, separately identify dividend, interest, and other fixed, determinable, annual, or periodical (FDAP) income subject to the 30% withholding rate or applicable treaty rate.
Step 4: Gather Deduction and Credit Documentation
If you are Group I (resident alien), collect itemized deduction documentation, including mortgage interest statements (Form 1098), property tax bills, charitable contribution receipts with required acknowledgments for donations of $250 or more, and medical expense records, or calculate your standard deduction based on filing status.
If you are Group II (nonresident with effectively connected income), collect only deductions connected to your U.S. trade or business income. If you are Group III (nonresident with unconnected income), no deductions apply.
Collect Form 6251 worksheets if the Alternative Minimum Tax may apply because you have preference items or large deductions. Attach statements supporting any claimed credits, such as the child tax credit or education credits, which are generally available only to resident aliens in Group I.
Step 5: Prepare Schedules A, B, C, D
Complete Schedule A (Income) listing all income sources separated by column: resident alien income in column (d), effectively connected nonresident income in column (e), and unconnected nonresident income in column (f), with corresponding amounts withheld at source and tax paid shown in column ©.
Complete Schedule B (Capital Gains and Losses) for gains or losses from property sales, noting date acquired, date sold, sales price, cost or other basis, and resulting gain or loss. Complete Schedule C (Itemized Deductions) showing deductions by type and amount for resident aliens and effectively connected deductions for nonresident aliens, organized by category.
Complete Schedule D (Tax Computation) showing adjusted gross income, standard or itemized deductions, exemption amounts, taxable income, tax calculated from 2011 Tax Rate Schedules, credits if applicable, and Alternative Minimum Tax from Form 6251 if required.
Step 6: Calculate Income and Adjusted Gross Income (Lines 15–17)
Enter total income on Form 1040-C, page 2, line 15 from Schedule A, line 4, using column (d) for resident aliens or column (e) for nonresidents with effectively connected income. Enter any adjustments to income on line 16, such as educator expenses, student loan interest deduction, or IRA deduction if you are a resident alien; nonresident aliens generally cannot claim adjustments to income except those directly connected to U.S. trade or business.
Subtract line 16 from line 15 to calculate adjusted gross income on line 17. This AGI amount is then carried forward to Schedule D for the tax computation.
Step 7: Compute Taxable Income and Apply Tax Rates
For Group I resident aliens: On Schedule D, enter your AGI from Form 1040-C page 2, line 17 on Schedule D line 1, and subtract your standard deduction or itemized deductions from Schedule C on line 2 to arrive at line 3. Then subtract your exemption amount on line 4, calculated as $3,700 multiplied by the number of exemptions claimed on Form 1040-C page 1, line 14d, from line 3 to arrive at taxable income on line 5. Apply the 2011 Tax Rate Schedules appropriate to your filing status to calculate tax.
For Group II nonresidents with effectively connected income: subtract itemized deductions connected to U.S. trade or business and one personal exemption of $3,700 from adjusted gross income to arrive at taxable income, then apply 2011 Tax Rate Schedules.
For Group III nonresidents with unconnected income: use the 30% statutory tax rate to total unconnected income from Schedule A, line 4, column (f), or attach a statement showing a lower treaty rate and computation if claiming treaty benefits.
Step 8: Add Alternative Minimum Tax, If Applicable
Complete Form 6251 (Alternative Minimum Tax—Individuals) if you have preference items such as accelerated depreciation, depletion allowances, certain deductions, or other adjustments that may trigger Alternative Minimum Tax liability.
If AMT applies after completing Form 6251, enter the AMT amount on Schedule D line 7 for Group I and Group II filers and add to the regular tax to determine the total tax before credits. Form 6251 and Alternative Minimum Tax do not apply to Group III filers who pay the flat 30% rate or treaty rate on unconnected income.
The AMT exemption amount for 2011 is $48,450 for single filers or $74,450 for married filing jointly filers, and begins to phase out at higher income levels.
Step 9: Apply Credits and Calculate Final Tax Liability
For resident aliens in Group I, claim tax credits allowed on Form 1040 including child tax credit, education credits such as the American Opportunity Credit or Lifetime Learning Credit, earned income credit if eligible, and other applicable credits by entering total credits on Form 1040-C, page 2, line 19 and subtracting from tax calculated on Schedule D.
For nonresidents with effectively connected income in Group II, claim only the limited credits allowed to nonresidents as specified in Form 1040-NR instructions. For Group III nonresidents with unconnected income, no credits apply.
On Form 1040-C, page 2, line 25, calculate total tax. On line 26, enter U.S. income tax paid or withheld at source from Schedule A, lines 4 and 5, column ©. On line 27, enter the 2011 estimated tax payments made. On line 29, total all payments and credits. Subtract line 29 from line 25 to determine the amount you owe on line 30 or the overpayment on line 31.
Step 10: Sign, Date, and File In Person; Retain Copy for Records
Sign Form 1040-C under penalty of perjury in the space provided on page 2. If filing jointly, your spouse must also sign. Date the return with the date of signature. If using a paid preparer, the preparer must also sign in the designated space and include their Preparer Tax Identification Number (PTIN) and firm information.
File the original Form 1040-C and one copy in person at your local IRS office at least two weeks before your departure date to allow sufficient time for the IRS to process the return and issue your Certificate of Compliance. Retain a copy of the complete return, including all schedules and attachments for your records.
The Certificate of Compliance (sailing permit), signed by the IRS Field Assistance Area Director, serves as proof of tax clearance for departure. Any overpayment shown on Form 1040-C is refunded only after you file your final return on Form 1040 or Form 1040-NR after the tax year ends, not when you file Form 1040-C.
Line Changes from Prior Year (2011 vs. 2010)
Change: Personal Exemption Amount
Prior year instruction for 2010: The personal exemption amount was $3,650 per exemption.
Current year instruction for 2011: The personal exemption amount increased to $3,700 per exemption. This amount is multiplied by the number of exemptions claimed on Form 1040-C, page 1, line 14d, to calculate the total exemption deduction on Schedule D, line 4.
Change type: Updated.
Change: Alternative Minimum Tax Exemption
Current year instruction for 2011: The Alternative Minimum Tax exemption amount is $48,450 for single filers or $74,450 for married filers who file jointly. This exemption begins to phase out at higher alternative minimum taxable income levels calculated on Form 6251. The AMT exemption is subtracted from alternative minimum taxable income before applying the AMT tax rates.
Change type: Clarified for 2011.
Final Compliance Notes
Form 1040-C is not a final income tax return. You must file Form 1040 if you are a resident alien at year's end, Form 1040-NR if you are a nonresident alien at year's end, or Form 1040NR-EZ if you qualify for the simplified nonresident return after the calendar tax year ends. The final return reports all income for the entire year and claims all applicable credits and deductions.
Any tax you pay with Form 1040-C counts as a credit against your final tax liability when you file your year-end return, or is refunded only to the extent you had taxable income in the current tax year through your departure date or in the preceding tax year. Form 1040-C must be filed in person at an IRS office and cannot be filed electronically.
Nonresident aliens with income from U.S. real property may elect to treat such income as effectively connected income for more favorable tax treatment. Gains or losses on disposition of U.S. real property interests by nonresidents are automatically treated as effectively connected income or loss. They are subject to withholding under the Foreign Investment in Real Property Tax Act (FIRPTA).
For professional assistance with your 2011 Form 1040-C departing alien tax return or any tax filing questions, contact our tax experts at (888) 260-9441.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
