Form 1040-C: U.S. Departing Alien Income Tax Return (2013)

What Form 1040-C Is For

Form 1040-C is a special tax form that certain non-U.S. citizens (called “aliens” in tax terminology) must file before leaving the United States. Think of it as an early tax report that proves you've paid your taxes or settled your tax obligations before you depart. The form serves as your ticket to obtaining a “certificate of compliance,” commonly known as a sailing permit or departure permit, which demonstrates that you haven't left any tax bills unpaid.

This isn't just a formality—it's a requirement that helps the IRS ensure they can collect any taxes you owe before you leave the country. When you file Form 1040-C, you're reporting all the income you've received (or expect to receive) for the entire year, even though the year hasn't ended yet. You'll need to estimate your total annual income and pay the expected tax on it at the time you file, though you'll settle the final amount when you file your regular annual tax return later.

The form applies to both resident aliens (those with green cards or who meet the substantial presence test) and nonresident aliens who don't fall into specific exemption categories. It's important to understand that different tax rules apply depending on your residency status, the type of income you earned, and whether that income was connected to a U.S. business or trade.

When You’d Use Form 1040-C

Filing Timeline Requirements

You must file Form 1040-C at least two weeks before your planned departure from the United States, but no earlier than 30 days before you leave. This narrow window is crucial—filing too early means your certificate won't be issued, and filing too late might delay your departure plans. If you're leaving between January 1 and April 15 of any year, you'll also need to file your previous year's tax return (Form 1040 or 1040NR) and pay any taxes due for that year.

Amendments and Corrections

There’s no provision for filing an “amended” Form 1040-C in the traditional sense. Once you've obtained your sailing permit and left the country, any corrections to your tax situation are handled through your annual tax return at the end of the year.

Multiple Departures in the Same Year

If you previously left the United States earlier in the same tax year and obtained a certificate of compliance, you may need to file Form 1040-C again for subsequent departures, depending on whether the IRS believes your leaving might jeopardize tax collection. The certificate issued when you indicate you plan to return to the United States can sometimes be valid for all departures during that tax year, but the IRS reserves the right to cancel it for later departures.

Key Rules or Details for 2013

Form 1040-C Is Not a Final Return

Form 1040-C is not your final tax return—it's a preliminary filing. You still must file your regular annual tax return (Form 1040 or Form 1040NR) after the tax year ends. Any tax you pay with Form 1040-C gets credited toward your final tax bill.

Who Must File & Who Is Exempt

Your obligation to file depends entirely on your visa status and income sources. Several categories of people don’t need to file, including:

• Diplomatic personnel
• Certain students and exchange visitors (F-1, F-2, J-1, J-2, H-3, H-4, Q visas)
• Short-term business visitors on B-1 or B-2 visas staying less than 90 days
• Canadian or Mexican residents who commute to work with tax withholding on their wages

Resident vs. Nonresident Tax Rules

• Resident aliens: taxed like U.S. citizens on worldwide income.
• Nonresident aliens split income into:
  • Effectively connected income (ECI) – taxed at graduated rates
  • Not effectively connected income (NEC) – taxed at 30% unless treaty applies

Payment Requirements

You generally need to pay the full tax shown on Form 1040-C when filing. The IRS may waive immediate payment if:

• You are returning to the U.S.
• You have substantial U.S. assets
• You post a bond guaranteeing future payment

Step-by-Step (High Level)

### 1. Determine Whether You Must File

Start by determining whether you need to file Form 1040-C or whether you qualify for an exception.

### 2. Gather Required Documentation

You’ll need:

• Two years of tax returns
• Wage statements
• Business/bank records
• Proof of estimated payments
• Visa/passport documentation
• Documentation for deductions, dependents, or treaty benefits

### 3. Make an IRS Appointment

Schedule an appointment at your local IRS Taxpayer Assistance Center at least two weeks before departure. Both spouses must attend if filing jointly.

### 4. Complete the Form During Your Appointment

Form components:

• Part I: Residency status
• Part II: Exemptions
• Part III: Tax calculation (varies by residency status)

Nonresidents must divide income into:

• Schedule A – effectively connected
• Schedule B – not effectively connected

### 5. Receive Your Sailing Permit

Once processed and paid (or payment waived), the IRS will issue your certificate of compliance.

Common Mistakes and How to Avoid Them

Treating Form 1040-C as a Final Return

Form 1040-C is only a pre-departure estimate. You must still file a final tax return at year-end.

Filing Too Late or Too Early

Appointments may take time. Start planning at least a month in advance.

Misclassifying Income

Nonresidents often misclassify income:

• Wages → effectively connected
• Interest/dividends → typically not effectively connected

Insufficient Documentation

Without proper records, the IRS cannot issue a permit. Bring a comprehensive documentation folder.

Assuming Previous Exemptions Still Apply

If your circumstances change (e.g., new income), you may now be required to file even if previously exempt.

What Happens After You File

Issuance of the Sailing Permit

If everything is complete and paid, you'll usually receive the permit immediately.

Validity of the Sailing Permit

Depending on IRS risk assessment, the permit may:

• Apply to all departures in the tax year, or
• Be valid only for a specific departure

Filing Your Annual Return After Leaving

You must file:

• Form 1040 if a resident alien on the last day of the year
• Form 1040NR if a nonresident alien on the last day

Some may need to file a dual-status return.

Applying Credits and Refunds

Payments counted as credits include:

• Estimated tax payments
• Withholding
• Amount paid with Form 1040-C

Refunds are only issued after filing the annual tax return.

FAQs

Do I really need a sailing permit to leave the United States?

It depends on your visa status and income situation. Six categories of aliens don't need sailing permits, including diplomats, certain students, short-term visitors, and Canadian/Mexican commuters. Most aliens who worked in the U.S. do need one.

What's the difference between Form 1040-C and Form 2063?

Form 2063 is shorter and for individuals with no taxable income or minimal risk of tax collection issues. Form 1040-C requires a full tax calculation.

I'm a student on an F-1 visa. Do I need to file Form 1040-C?

Most F-1 students do not need to file unless they earned other taxable income such as freelance or business income.

How do I handle tax treaties that reduce my tax rate?

Document which treaty article applies and include supporting calculations. You may need to file Form 8833 with your annual return.

What if I’m leaving permanently and giving up my green card?

Long-term residents may need to file Form 8854 and may owe expatriation tax. Special rules apply.

Can my spouse and I file a joint Form 1040-C?

Joint filing is allowed only if one spouse is a resident alien and both expect to file jointly at year-end. Two nonresident aliens cannot file jointly.

I already filed Form 1040-C earlier this year. Do I need to file again?

It depends on whether your previous sailing permit was valid for the entire year or only for a specific departure.

References

• IRS Form 1040-C Information
• Departing Alien Clearance (Sailing Permit)
• Topic 858: Alien Tax Clearance

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