Form 1040-C (U.S. Departing Alien Income Tax Return) For Tax Year 2018: IRS Checklist
Year and Form Identification
Form 1040-C for 2018 applies exclusively to nonresident and resident aliens departing the United States or its territories. This form serves as a sailing or departure permit. It is distinct from annual income tax returns, which certify tax compliance for departure purposes only, rather than serving as a final tax return for the year.
The 2018 tax year implemented the Tax Cuts and Jobs Act provisions, including the suspension of personal exemptions, increased standard deduction amounts, and a limitation on state and local tax deductions to a combined $10,000 ($5,000 if married filing separately). The Affordable Care Act shared responsibility payment still applied in 2018 for individuals without qualifying health coverage, though it was eliminated beginning in 2019.
Program-Specific Rules for 2018
The 2018 instructions to Form 1040-C require filing before departure to obtain a certificate of compliance, commonly known as a sailing permit or departure permit. Resident aliens with taxable income must file unless the IRS Area Director determines that departure will not hinder tax collection.
Nonresident aliens must file to report U.S.-source income and pay tax due for the entire departure-year calendar period. The form categorizes filers into three groups with different tax treatments: Group I consists of resident aliens taxed on their worldwide income at graduated rates, while Group II comprises nonresident aliens with income effectively connected to a U.S. trade or business, which is taxed at graduated rates. Group III consists of nonresident aliens with income not effectively connected to a U.S. trade or business, which is taxed at a flat 30% rate or a lower treaty rate.
Ten-Step Compliance Checklist for Form 1040-C (2018)
Step 1: Determine Alien Status and Group Classification
Verify whether you are a resident alien under the Green Card Test by being a lawful permanent resident at any time during 2018, or under the Substantial Presence Test by being physically present at least 31 days in 2018 plus meeting the 183-day weighted presence test for the three years 2018-2017-2016, calculated as each day in 2018 counting as one full day, each day in 2017 counting as 1/3 day, and each day in 2016 counting as 1/6 day.
If you meet neither test for 2018 but will meet the Substantial Presence Test in the following year, you may elect to be treated as a resident alien for part of 2018, becoming a dual-status alien. Identify your group on line 1 of Form 1040-C: Group I for resident aliens, Group II for nonresident aliens with effectively connected trade or business income, or Group III for nonresident aliens with income not effectively connected to a U.S. trade or business. Your group classification determines which tax rates apply and which deductions you may claim.
Step 2: Gather Departure Documentation
Obtain your valid passport, along with an alien registration card (green card) or visa, and document your planned departure date with supporting evidence, such as an airline ticket or travel itinerary. Form 1040-C instructions require filing at least two weeks before the scheduled departure, but no earlier than thirty days before departure, to allow sufficient processing time.
Collect proof of your U.S. taxpayer identification number, such as your Social Security card showing your Social Security Number or IRS Notice CP 565 showing your Individual Taxpayer Identification Number (ITIN). If you do not have a taxpayer identification number, you must apply for one before filing Form 1040-C.
Step 3: Compile Income Records for the Entire 2018 Tax Year
Gather copies of all U.S. income tax returns filed for the past two years, or if you have been in the United States for less than two years, for that shorter period. Assemble copies of Form W-2 (Wage and Tax Statement) from each employer for 2018, showing wages paid and federal income tax withheld. If you are self-employed, provide a statement of income and expenses through your departure date.
Collect all Forms 1099 issued for 2018, including Form 1099-MISC for miscellaneous income, Form 1099-INT for interest income, Form 1099-DIV for dividend income, and any other information returns reporting income. Include receipts showing income taxes paid on prior-year returns and proof of any estimated tax payments made in 2018 and any preceding year. Form 1040-C requires reporting income for the entire calendar year, including income expected to be received after your departure.
Step 4: Document Business Expenses and Deductions
Obtain bank records, canceled checks, receipts, and other documentation proving deductions claimed, business expenses, and information about dependents if you are claiming credits. If you are self-employed, prepare a statement of income and costs covering the period up to your departure date. If you operate more than one business, you may need to complete a separate Schedule C (Form 1040) for each company when you file your annual return after year-end.
Note that for 2018, personal exemptions are suspended under the Tax Cuts and Jobs Act, so you cannot claim deduction amounts for yourself, your spouse, or dependents based on personal exemptions. However, the Child Tax Credit amount has increased to $2,000 per qualifying child who is a U.S. citizen, national, or resident alien, subject to income phase-out limitations, for resident aliens in Group I, state and local tax deductions are limited to a combined $10,000 ($5,000 if married filing separately).
Step 5: Document Property Sales and Capital Gains or Losses
Compile documents showing any gain or loss from the sale or exchange of personal property, real property, capital assets, and merchandise during 2018. Include closing statements from real estate sales, broker statements from securities transactions, and records showing purchase dates, sale dates, cost basis, and sales proceeds. If you have capital gains or losses, you will need to complete Schedule D (Form 1040) for your annual return.
Suppose you are a nonresident alien in Group II or Group III. In that case, certain gains from U.S. real property sales may be subject to withholding under the Foreign Investment in Real Property Tax Act (FIRPTA). Document any amounts already withheld at source and include copies of Form 8288-A showing withholding amounts.
Step 6: Document Scholarships, Fellowships, Grants, and Treaty Benefits
Gather verification of the grantor, source, and purpose of any scholarship, fellowship, or grant received in 2018. Collect copies of the application and approval documents, and prepare a statement showing the amount paid and your duties and obligations under the grant. Document any prior grants or awards received in previous years.
If you claim treaty benefits to reduce or eliminate U.S. tax on certain types of income, document your qualification for those benefits, including proof of tax residency in the treaty country, the specific treaty article claimed, and any required forms, such as Form 8233 for personal services income or Form W-8BEN for passive income.
Step 7: Assemble Required Tax Forms and Schedules
File an original and one copy of Form 1040-C for the 2018 tax year in which you plan to leave the United States. Determine your group classification (I, II, or III) and complete Schedule A (Income) with the appropriate columns: column (d) for resident alien income, column (e) for nonresident alien income effectively connected with a U.S. trade or business, or column (f) for nonresident alien income not effectively connected with a U.S. trade or business.
If you have capital gains or losses from the sale of property, complete Schedule B (Certain Gains and Losses from Sales or Exchanges). Complete Schedule A (Itemized Deductions) if claiming deductions; resident aliens may claim the same itemized deductions allowable on Schedule A (Form 1040), while nonresident aliens may claim only deductions connected to U.S. trade or business income. For Group I filers, calculate adjustments to income on line 17 using the same adjustments allowed on Form 1040, including educator expenses, student loan interest deduction, and qualified business income deduction (up to 20% of qualified business income from a qualified trade or business).
Attach Form 8843 if you qualify as an exempt individual (teacher, trainee, student on F, J, M, or Q visa) claiming to exclude days of presence. If applicable, attach Form 8840 (Closer Connection Exception Statement for Aliens) if you claim a closer connection to a foreign country.
Step 8: Calculate Income Tax Liability
Complete Part III (Figuring Your Income Tax) on Form 1040-C to determine tax liability based on your group classification. For Group I resident aliens, use lines 16 through 23: enter total income on line 15 from Schedule A column (d), claim adjustments on line 17, and enter itemized deductions or standard deduction on line 18 using 2018 standard deduction amounts of $12,000 for single filers, $24,000 for married filing jointly, or $18,000 for head of household.
Calculate taxable income on line 19 and tax on line 21 using 2018 tax rate schedules with rates ranging from 10% to 37%. For Group II nonresident aliens with effectively connected income, use lines 16 through 25: enter total income on line 15 from Schedule A column (e), enter deductions connected to that income on line 22, calculate taxable income on line 25, and figure tax on line 26 using graduated rates.
For Group III nonresident aliens with income not effectively connected to a U.S. trade or business, use lines 24 and 25: multiply line 23 (total non-effectively connected income) by 30% or the applicable lower treaty rate if you qualify for treaty benefits. Include the amount of U.S. income tax paid or withheld at source from Schedule A line 3, column ©.
Step 9: Verify Certificate of Compliance Eligibility and Prepare Payment
Determine whether you qualify for a certificate of compliance (sailing or departure permit) without paying tax in advance. Generally, a certificate will be issued without advance payment if you have not received a termination assessment that demands immediate payment of current and prior-year taxes. Suppose the IRS Area Director believes your departure will jeopardize tax collection. In that case, you must either pay the tax due in certified funds (cashier’s check, certified bank check, certified postal money order, or cash) or post a bond to secure payment.
If you are a lawful permanent resident with no definite plans to return to the United States, notify the Department of State and U.S. Citizenship and Immigration Services (USCIS) when you file Form 1040-C. Confirm that you owe no income tax from the current year through your departure date and from the preceding year unless the Area Director has determined that your leaving will not hinder collection.
Step 10: File and Obtain Sailing or Departure Permit
File Form 1040-C (original and one copy) at an IRS Taxpayer Assistance Center (TAC) at least two weeks before, but no more than thirty days before your planned departure. Call the TAC at 844-545-5640 to schedule an appointment, as walk-in service may not be available. Do not wait until the last minute, as processing delays may prevent you from obtaining your certificate in time for departure.
When an IRS Field Assistance Area Director agent reviews your submission and signs the certificate of compliance section on your Form 1040-C copy, that signed certificate serves as your sailing or departure permit and applies to all departures during 2018. The IRS may cancel the license on any later departure if the Area Director believes tax collection is jeopardized. After filing Form 1040-C, you must also file Form 1040 or Form 1040-NR for the complete 2018 tax year and pay any additional tax due. Form 1040-C is not your annual income tax return and does not replace that filing requirement.
2018 Form Changes and Updates
For tax year 2018, personal exemptions were suspended under the Tax Cuts and Jobs Act, meaning taxpayers could not claim personal exemption deductions for themselves, their spouse, or dependents. In prior years, taxpayers claimed personal exemptions that reduced taxable income by a specified dollar amount per person. The Child Tax Credit amount increased for 2018, with credits of up to $2,000 per qualifying child and an additional credit of up to $500 per dependent who does not qualify for the Child Tax Credit.
Standard deduction amounts for 2018 increased significantly to $12,000 for single filers, $24,000 for married filing jointly, and $18,000 for head of household. The deduction for state and local taxes (income, sales, or property) was limited to a combined $10,000 ($5,000 if married filing separately) beginning in 2018. The ACA shared responsibility payment still applied for 2018 for individuals or dependents lacking qualifying health coverage, reported on Schedule 4, line 61 of Form 1040.
Form-Specific Limitations for 1040-C (2018)
Resident aliens in Group I filing Form 1040-C may claim the same credits available on Form 1040, including the Child Tax Credit and education credits, but personal exemptions are suspended for 2018. Nonresident aliens in Groups II and III cannot claim the standard deduction, earned income tax credit, or most non-business deductions.
They may claim only deductions directly connected to effectively connected income and are subject to the 30% flat tax rate or applicable lower treaty rate on income not effectively connected to a U.S. trade or business. If only one spouse is a resident alien, both spouses may elect to file a joint Form 1040-C for the current tax year, treating the nonresident spouse as a resident for tax purposes.
For professional assistance with your 2018 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.
