Form 1040-C: U.S. Departing Alien Income Tax Return (2012)
What the Form Is For
Form 1040-C is a specialized tax document that certain foreign nationals (aliens) must file before leaving the United States or any of its territories. Think of it as your tax "exit ticket"—it proves to the IRS that you've settled your U.S. tax obligations before departing the country. When you file this form, you report all income you've received (or expect to receive) during the entire tax year and pay the estimated tax on that income. The IRS then issues you a Certificate of Compliance, commonly called a "sailing permit" or "departure permit," which demonstrates you're in good standing with U.S. tax laws.
It's crucial to understand that Form 1040-C is not your final tax return for the year. You still need to file a regular annual return (Form 1040 for resident aliens or Form 1040-NR for nonresident aliens) 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 receive a refund when you file your year-end return.
Not everyone needs Form 1040-C. Many aliens are exempt from this requirement, including diplomatic personnel, certain students and exchange visitors on F, J, M, or Q visas (if they meet specific income limitations), short-term business or pleasure visitors on B visas staying less than 90 days, and Canadian or Mexican residents who commute to work in the U.S. and have taxes withheld from their wages.
When You’d Use It
You must file Form 1040-C at least two weeks before your planned departure date, but no earlier than 30 days before you leave. This timing window is critical—filing too early means your certificate won't be valid, while waiting until the last minute risks missing your departure if complications arise. To file, you need to schedule an appointment at your local IRS Taxpayer Assistance Center; you cannot simply walk in or mail the form.
Late Filing
There's no such thing as filing Form 1040-C "late" in the traditional sense because you legally cannot leave the country without it if you're required to obtain one. If you've already departed without obtaining the certificate when you were supposed to, you've violated tax compliance requirements and may face serious consequences, including difficulties reentering the United States and potential penalties.
Amendments
You cannot file an amended Form 1040-C.
If your tax situation changes after you receive your certificate but before you depart, or if you discover errors, contact the IRS office that issued your certificate immediately. After leaving the U.S., any corrections must be handled through your regular annual tax return.
Key Rules or Details for 2012
Residency Status Matters
How you complete Form 1040-C depends entirely on whether you're classified as a resident alien or nonresident alien for tax purposes. Resident aliens (those with green cards or who meet the "substantial presence test") follow rules similar to U.S. citizens and report worldwide income. Nonresident aliens generally pay tax only on U.S.-source income, with different rates depending on whether that income is effectively connected with a U.S. trade or business.
Income Reporting
You must report all income received or reasonably expected to be received for the entire tax year, not just up to your departure date.
Tax Payment Requirement
Generally, you must pay the full amount of tax due when you file Form 1040-C unless the IRS determines your departure won't jeopardize tax collection.
Joint Returns
Nonresident alien spouses cannot file jointly.
Resident alien couples can file jointly only if both spouses expect to qualify for joint filing when the tax year ends.
Social Security and Medicare (2012 Rates)
Employees paid 4.2% Social Security tax (up to $110,100) and 1.45% Medicare tax.
Self-employed individuals paid 10.4% Social Security and 2.9% Medicare.
Step-by-Step (High Level)
Step 1 – Determine If You Need the Form
Review the six categories of aliens exempt from the sailing permit requirement.
Step 2 – Gather Your Documents
Collect your passport, visa, past returns, wage statements, receipts, proof of estimated payments, property sales documents, scholarship records, treaty documentation, travel proof, and tax ID number.
Step 3 – Schedule Your Appointment
Contact your local IRS Taxpayer Assistance Center. If both spouses are departing, both must attend.
Step 4 – Complete the Form
Fill out Parts I–III and applicable schedules: A, B, C, and D.
Step 5 – File and Pay
Bring the original, a copy, and all documents to your appointment. Pay any tax due or arrange a bond if allowed.
Step 6 – File Your Final Annual Return
After year-end, file Form 1040 or 1040-NR and claim any Form 1040-C tax as a credit.
Common Mistakes and How to Avoid Them
Mistake: Waiting Until the Last Minute
Solution: Apply two to four weeks before departure.
Mistake: Confusing Form 1040-C With Your Annual Return
Solution: Remember that Form 1040-C is preliminary; you must still file a regular return.
Mistake: Failing to Report All Expected Income
Solution: Estimate full-year income, even post-departure.
Mistake: Incorrect Residency Status
Solution: Carefully check substantial presence and green card tests.
Mistake: Missing Required Documentation
Solution: Follow the instructions checklist closely.
Mistake: Not Bringing Spouse’s Information
Solution: Bring all spouse info if you live in a community property state.
Mistake: Claiming Improper Exemptions
Solution: Review nonresident alien exemption rules carefully.
What Happens After You File
Immediate Results
If everything is correct, the IRS issues your sailing permit at the appointment.
Validity Period
Validity depends on whether immediate payment was required and your circumstances.
Departure Requirements
You're not required to show your permit at the airport, but keep it with your travel documents.
Filing Your Annual Return
File your regular return after the tax year ends. Include all income for the year and report credit for any tax paid with Form 1040-C.
Refunds
Overpayments cannot be refunded at departure—only after filing your annual return.
Future Implications
Compliance helps future visa, residency, and immigration processes.
Failure to comply can create serious future issues.
FAQs
#### Can I file Form 1040-C by mail instead of going in person?
No. You must file at a Taxpayer Assistance Center by appointment.
#### What's the difference between Form 1040-C and Form 2063?
Form 2063 is simpler and requires no tax calculation. It applies only if certain income or compliance criteria are met.
#### I'm an F-1 student. Do I need Form 1040-C before leaving for summer vacation?
Usually no, unless you had income outside the exempt categories.
#### What if my departure plans change after I get my sailing permit?
The certificate becomes moot for that departure. The tax paid remains a credit on your annual return.
#### Can I claim the same deductions and credits on Form 1040-C as on Form 1040?
Resident aliens usually can. Nonresident alien rules depend on whether income is effectively connected with a U.S. trade or business.
#### I'm a green card holder leaving permanently. Do I need Form 1040-C?
Yes—unless you qualify for an exemption. You may also need to file Form 8854 and be subject to expatriation tax rules.
#### How do I estimate income for the entire year if I'm leaving midyear?
Project wages, self-employment income, investments, rental income, and other sources based on year-to-date patterns.
