Form 1040-C: U.S. Departing Alien Income Tax Return (2015)
What Form 1040-C Is For
Form 1040-C is a specialized tax form filed by aliens (non-U.S. citizens) who plan to leave the United States or any of its possessions. The form serves two critical purposes: first, it allows departing aliens to report all income received or reasonably expected to be received for the entire tax year up to and including the departure date; second, it requires payment of the expected tax liability on that income. Think of it as a pre-departure tax settlement with the IRS. The form is not your final annual tax return—you'll still need to file a regular Form 1040, 1040-NR, or 1040-NR-EZ after the tax year ends. The tax you pay with Form 1040-C acts as a credit against your final annual return.
The form generates a "certificate of compliance," commonly known as a sailing permit or departure permit. This certificate proves you've satisfied your U.S. tax obligations according to available information. While called a "sailing" permit (a term from when most international travel occurred by ship), it applies to all departures regardless of your mode of transportation—plane, train, car, or vessel.
Whether you need Form 1040-C depends on your alien status and circumstances. Both resident aliens (those with green cards or who meet the substantial presence test) and nonresident aliens may need to file, though numerous exceptions exist. The IRS requires this form to prevent tax evasion by aliens who might leave the country without paying taxes owed.
When You'd Use Form 1040-C (Including Late and Amended Scenarios)
You must file Form 1040-C before you leave the United States—timing is critical. The IRS recommends visiting your local IRS Taxpayer Assistance Center at least two weeks before your planned departure date, but no more than 30 days in advance. Waiting until the last minute risks unexpected problems that could delay your travel plans. If you're departing between January 1 and April 15, you must also file your prior year's return (Form 1040 or 1040-NR for 2014) and pay any taxes due.
Form 1040-C is not designed for amended returns. It's a special pre-departure filing that addresses your tax situation through your departure date. Once you've filed Form 1040-C and received your sailing permit, that certificate typically covers all departures during the current tax year unless the IRS revokes it for later departures. However, if you owe taxes and the IRS determines your departure would jeopardize tax collection, your certificate applies only to the specific departure for which it was issued.
If you received a sailing permit but your travel plans change and you don't actually depart, you still must file your regular annual income tax return at year's end. The Form 1040-C filing doesn't eliminate your obligation to file a final return covering the entire tax year.
Key Rules or Details for 2015
Who Must File
Aliens intending to leave the United States generally need a certificate of compliance before departing. However, several important exceptions exist. You don't need the certificate if you're a foreign government representative with a diplomatic passport, a student or exchange visitor on an F, J, M, or Q visa (with only specific types of U.S. income), on a pleasure trip with a B-2 visa, on a business trip with a B-1 or combined B-1/B-2 visa staying 90 days or fewer, passing through the U.S. in transit, admitted on a border-crossing identification card, a Canadian or Mexican resident who frequently commutes to work in the U.S., or a military trainee leaving on official orders.
Two Form Options
Most departing aliens who need a certificate can file either Form 1040-C or the simpler Form 2063. You can use Form 2063 if you've filed all required U.S. tax returns, paid all taxes due, and either had no taxable income for the departure year and preceding year, or the IRS has determined your departure won't hinder tax collection. If you don't qualify for Form 2063, you must file Form 1040-C.
Residency Status Matters
Form 1040-C divides filers into three groups based on residency status. Group I consists of resident aliens (those meeting the green card test or substantial presence test), who report worldwide income and can claim the same deductions and credits as U.S. citizens. Group II includes nonresident aliens with income effectively connected to a U.S. trade or business—this income faces graduated tax rates like U.S. citizens. Group III covers nonresident aliens with U.S.-source income not effectively connected to a U.S. trade or business—this income generally faces a flat 30% tax rate unless reduced by treaty.
Payment Requirements
You generally must pay all tax shown on Form 1040-C when filing, plus any back taxes owed. Payment must be in certified funds—cashier's check, certified bank or postal money order, or cash. Check with your local IRS office for acceptable payment methods. If the IRS believes your departure jeopardizes tax collection, you must pay the tax or post bond before receiving your certificate.
Step-by-Step (High Level)
Step 1: Determine if You Need the Form
Review the exceptions list to see if you qualify to skip the filing requirement. If none apply and you're an alien planning to leave the U.S., you need a certificate of compliance.
Step 2: Gather Required Documentation
Schedule an appointment with your local Taxpayer Assistance Center by calling 1-800-829-1040. Bring your valid passport with alien registration card (green card) or visa, copies of U.S. tax returns for the past two years, receipts for taxes paid, proof of deductions and expenses, employer statements showing wages paid and taxes withheld (or income and expense statements if self-employed), proof of estimated tax payments, documents showing gains or losses from property sales, scholarship or fellowship grant documentation if applicable, documents supporting any tax treaty benefits, your travel departure document (like an airline ticket), and verification of your taxpayer identification number.
Step 3: Complete the Form
Enter your identifying information including name, taxpayer identification number (Social Security Number or Individual Taxpayer Identification Number), and passport details. Complete Part I explaining your resident or nonresident alien status. Part II lists your exemptions and dependents. Part III is where you calculate your tax based on which group(s) apply to you—use lines 15-22 for Groups I and II, lines 23-24 for Group III, or lines 15-24 if you're a nonresident alien falling into both Groups II and III.
Step 4: File and Pay
File an original and one copy of Form 1040-C at your appointment. Pay the full amount of tax due in certified funds unless you qualify for a bond or the IRS determines your departure won't jeopardize tax collection. If filing between January 1 and April 15, also submit your prior year's return with payment.
Step 5: Receive Your Certificate
Once approved, the IRS signs the certificate of compliance section on your Form 1040-C. Keep this sailing permit with you when traveling—it serves as proof you've satisfied U.S. tax obligations.
Step 6: File Your Annual Return
Remember, Form 1040-C is not your final return. After the tax year ends, file Form 1040 or Form 1040-NR as required, claiming the tax paid with Form 1040-C as a credit against your annual liability.
Common Mistakes and How to Avoid Them
Mistake 1: Waiting Until the Last Minute
Many aliens schedule their IRS appointment only days before departure. Services are limited at Taxpayer Assistance Centers, appointments are required, and unexpected documentation issues can arise. Avoid this by scheduling your appointment at least two weeks before travel, but remember you cannot apply earlier than 30 days before your planned departure.
Mistake 2: Assuming Form 1040-C Is Your Final Return
A common misconception is that filing Form 1040-C completes your tax obligations for the year. It doesn't. You still must file a regular annual tax return (Form 1040 or 1040-NR) after December 31. The tax paid with Form 1040-C simply gets credited against your final tax liability. Any overpayment shown on Form 1040-C cannot be refunded when you file it—refunds only come through your year-end return.
Mistake 3: Reporting Only U.S.-Source Income
Resident aliens (Group I) must report worldwide income on Form 1040-C, not just U.S. earnings. This includes foreign bank account interest, foreign employment income, and other worldwide sources. Failing to report all income can delay your certificate or lead to additional taxes owed later.
Mistake 4: Not Understanding Income Classification
Nonresident aliens must correctly distinguish between income "effectively connected" with a U.S. trade or business (Group II) and income not effectively connected (Group III), as these face dramatically different tax rates—graduated rates versus a flat 30% rate. Wages as an employee are effectively connected; portfolio interest and dividends generally are not. Misclassification leads to incorrect tax calculations.
Mistake 5: Missing Treaty Benefits
If you're entitled to reduced tax rates or exemptions under a tax treaty between your country and the United States, you must attach a statement showing your computation and cite the applicable treaty articles. Many aliens pay more tax than required by overlooking these treaty benefits. Review Publication 901 (U.S. Tax Treaties) or the IRS treaty tables before filing.
Mistake 6: Incorrect or Missing Identification Numbers
You must provide your Social Security Number or Individual Taxpayer Identification Number. If you don't have one, you cannot file Form 1040-C until you obtain it. Apply for an SSN through the Social Security Administration if eligible; otherwise, apply for an ITIN using Form W-7. Processing these applications takes time, so start early.
What Happens After You File
Immediate Processing
During your appointment, the IRS agent reviews your Form 1040-C and supporting documents. If everything is in order and you've paid the required tax (or qualify for bond or no-payment options), the agent signs the certificate of compliance section. Generally, this certificate will be issued without paying tax or posting bond if you haven't received a termination assessment—a demand for immediate payment of income tax for the current and preceding year.
Certificate Validity
The sailing permit's validity depends on your circumstances. If the IRS determines your departure won't hinder tax collection, your certificate typically covers all departures during the current tax year, though the IRS may cancel it for later departures if collection appears jeopardized. If you owe taxes and the IRS determines your departure would jeopardize collection, your certificate applies only to the specific departure for which it was issued. You can obtain a permit without paying if you provide sufficient evidence that you intend to return to the United States and that your departure doesn't jeopardize tax collection, but you must still have filed all required prior returns and paid those taxes.
Not a Final Determination
The certificate doesn't represent a final determination of your tax liability. It simply confirms you've satisfied obligations based on available information at that time. If the IRS later determines you owe additional tax, you'll be required to pay it plus potential interest and penalties.
Year-End Filing Requirement
After December 31, you must file your regular annual income tax return—Form 1040 if you're a U.S. citizen or resident alien on the last day of the year, or Form 1040-NR if you're a nonresident alien. Individuals who were resident aliens at the beginning of the year but nonresident aliens at year's end must file a "dual-status" return. Report all income for the entire year and claim the tax paid with Form 1040-C as a credit. If your Form 1040-C showed an overpayment, it will be refunded only if and to the extent your final return shows an overpayment.
Special Considerations for Green Card Holders
If you're a lawful permanent resident (green card holder) with no definite plans to return to the United States and you plan to surrender your green card, you must notify the Department of Homeland Security of your residency termination. If you've been a lawful permanent resident for at least 8 of the last 15 tax years, you must also file Form 8854 and may be subject to expatriation tax under section 877A.
FAQs
Can I file Form 1040-C electronically?
No, Form 1040-C must be filed in person at an IRS Taxpayer Assistance Center. You need an appointment, which you can schedule by calling the local TAC office. Bring the original form plus one copy, along with all required supporting documentation. The in-person requirement ensures the IRS can review your documents, verify your identity, collect payment if due, and issue your sailing permit on the spot.
What if I leave the United States without filing Form 1040-C when required?
Departing without the required certificate of compliance can create serious consequences. Under U.S. immigration law, a lawful permanent resident who is required to file a tax return as a resident but fails to do so may be regarded as having abandoned permanent resident status and could lose that status. Additionally, you remain liable for all U.S. taxes owed regardless of where you live, and the IRS can pursue collection actions. If you return to the United States, you may face difficulties at immigration or additional IRS scrutiny.
If I'm a nonresident alien who was in the United States less than 183 days, do I still need Form 1040-C?
The 183-day threshold relates to the substantial presence test for residency determination, not whether you need Form 1040-C. Even if you're in the U.S. briefly, if you're an alien planning to depart and you don't qualify for one of the specific exceptions (like being on a B-2 pleasure trip visa or being a student with only certain types of income), you need to obtain a certificate of compliance. However, you might qualify to file the simpler Form 2063 instead of Form 1040-C if you have no taxable income or the IRS determines your departure won't hinder tax collection.
Can married couples file a joint Form 1040-C?
Nonresident aliens cannot file joint returns under any circumstances. Resident aliens can file a joint Form 1040-C only if both spouses reasonably expect to be eligible to file jointly at the close of their tax period, and if the tax period of one spouse is terminated, the other spouse's tax period terminates at the same time. Both spouses' information, identification numbers, and income must be included on the form, and it may be necessary to complete a separate Part I for each spouse.
How does Form 1040-C interact with tax treaties?
If you're entitled to reduced withholding rates or tax exemptions under a treaty between your country and the United States, you must attach a statement to Form 1040-C showing your tax computation and citing the applicable treaty articles. For Group III income (U.S.-source income not effectively connected with a trade or business), the standard rate is 30%, but treaties often provide lower rates. You can find treaty information in IRS Publication 901 or at IRS.gov/Individuals/International-Taxpayers/Tax-Treaties. If you're a dual-resident taxpayer claiming treaty benefits, additional reporting on Form 8833 may be required.
What happens if I filed Form 1040-C but my travel plans change and I don't leave?
If you obtained a sailing permit but don't actually depart, you still must file your regular annual income tax return for the full year. The Form 1040-C filing doesn't replace your year-end return obligation. When filing your annual return, report all income for the entire year and claim the tax paid with Form 1040-C as a credit against your total liability. If this creates an overpayment, you'll receive a refund through your annual return.
Do I need a new certificate every time I leave the United States?
It depends on your tax situation. If the IRS is satisfied your departure won't jeopardize tax collection and you furnished sufficient evidence of your intent to return, your sailing permit typically covers all departures during the current tax year. However, the IRS can revoke this multi-departure validity for later trips if circumstances change. If you owe taxes and the IRS determines your departure would jeopardize collection, your certificate applies only to the specific departure for which it was issued, and you'd need to file a new Form 1040-C for any subsequent departures during the same year.
This summary is based on the 2015 revision of Form 1040-C and its instructions. For the most current information and any legislative changes, visit IRS.gov/Form1040C.
