Before leaving the United States, all aliens (except those listed below) must obtain a “Certificate of Compliance” from the U.S. Internal Revenue Service (“IRS”). This document, also known as a “Sailing Permit” or a “Departure Permit,” must be secured from the IRS prior to leaving the United States. Here are ten things to know about Sailing Permits:
NOTE: This post is designed to provide practical and useful information on the subject matter covered. It is provided, however, with the understanding that no legal or tax services are being rendered or provided. U.S. tax matters are particularly complicated. If tax assistance is required, the services of a competent tax professional should be sought.
- Filing with IRS. To obtain a “Sailing Permit,” a departing alien must file a Form 2063 or Form 1040-C (whichever applies) with IRS. A departing alien cannot apply earlier than thirty (30) days before his/her planned departure date. Do not wait until the last minute in case there are unexpected problems. Both forms have a “Certificate of Compliance” section, which, when signed by the IRS, certifies that the departing alien’s U.S. tax obligations have been satisfied according to available information. The Form 1040-C copy of the signed certificate, or the one detached from Form 2063, is the “Sailing Permit.” It is advisable for aliens to get the “Sailing Permit” from an IRS office around their employment, but it can also be obtained from an IRS office in the area of their departure.
- Form 2063. This short form does not include a tax computation. The following departing aliens can get the “Sailing Permit” by filing the Form 2063:
- Aliens, whether resident or nonresident, who have had no taxable income for the tax year up to and including the date of departure and for the preceding year, if the period for filing the income tax return for that year has not expired; and
- Resident aliens who have received taxable income during the tax year or preceding year and whose departure will not hinder the collection of any tax.
Aliens in either of these categories who have not filed an income tax return or paid income tax for any tax year must file the return and pay the income tax before they can be issued a “Sailing Permit” on Form 2063. However, if the IRS has information indicating that the aliens are leaving to avoid paying their income tax, they must file a Form 1040-C.
- Form 1040-C. Ordinarily, all income received or reasonably expected to be received during the tax year up to and including the date of departure must be reported on Form 1040-C and the tax on it must be paid. When a departing alien pays any tax shown as due on the Form 1040-C, and files all returns and pay all tax due for previous years, he/she will receive a “Sailing Permit”. Note, the IRS may permit a departing alien to furnish a bond guaranteeing payment instead of paying the taxes for certain years.
- Husbands and Wives. Departing husbands and wives who are nonresident aliens cannot file joint returns. However, if one spouse is a resident alien, they can file a joint return on Form 1040-C if (a) both spouses can reasonably be expected to qualify to file a joint return at the normal close of their tax year, and (b) the tax years of the spouses end at the same time.
- Identifying Number. A departing alien is generally required to enter his/her social security number (“SSN”) or Individual Taxpayer Identification Number (“ITIN”). To apply for an SSN, get Form SS-5 from a Social Security Administration (“SSA”) office or call the SSA at 1-800-772-1213. Fill in Form SS-5 and return it to the SSA. If an alien does not have an SSN and is not eligible to get one, one must apply for an ITIN. It usually takes about 4-6 weeks to get an ITIN. If you already have an ITIN, enter it wherever your SSN is requested.
- Documents to Bring to IRS Office. The processing for a “Sailing Permit” will go quicker if the following documents related to the departing aliens’ income and stay in the United States are brought (if applicable) to the IRS office.
- Passport and alien registration card or visa.
- Copies of U.S. income tax returns filed for the past 2 years. If in the United States for less than 2 years, bring the income tax returns you filed for that period.
- Receipts for income taxes paid on these returns.
- Receipts, bank records, canceled checks, and other documents that prove deductions, business expenses, and dependents claimed on your returns.
- A statement from each employer showing wages paid and tax withheld from January 1 of the current year to the date of departure, if an employee. If self-employed, bring a statement of income and expenses up to the planned date of departure.
- Proof of estimated tax payments for the past year and this year.
- Documents showing any gain or loss from the sale of personal property, including capital assets and merchandise.
- Documents relating to scholarship or fellowship grants including verification of the grantor, source, and purpose of the grant.
- Documents indicating qualification for any special tax treaty benefits claimed.
- Document verifying date of departure from the United States, such as an airline ticket.
- Document verifying U.S. taxpayer identification number, such as a social security card or an IRS-issued CP 565 showing individual taxpayer identification number (“ITIN”).
- Aliens Not Required to Obtain “Sailing Permits”. If a departing alien is one of the following categories, there is no requirement to obtain a “Sailing Permit”:
- F-1, F-2, H-3, H-4, J-1, J-2, Q-1, Q-2, or Q-3 visa, or the spouse or child of such individual, if no income has been received in the United States other than (a) interest on deposits, if that interest is not effectively connected with a U.S. trade or business; (b) allowances covering expenses incident to study or training; or (c) income from employment authorized under U.S. immigration laws.
- Student, or the spouse or child of a student, with an M-1 or M-2 visa, if no income has been received in the United States other than (a) interest on deposits, if that interest is not effectively connected with a U.S. trade or business, or (b) income from employment authorized under U.S. immigration laws.
- On a business trip, have a B-1 visa or a combined B-1/B-2 visa, or are present in the United States under Visa Waiver, and do not stay in the United States or any of its possessions for more than 90 days during the tax year.
- On a pleasure trip and have a B-2 visa.
- Representative of foreign government who holds a diplomatic passport, or a member of the representative’s household or servant who accompanies the representative.
- Separate from Annual U.S. Income Tax Return. Form 1040-C is not an annual U.S. income tax return. If an income tax return is required by law, that return must be filed even though a Form 1040-C has already been filed. The tax paid with Form 1040-C should be taken as a credit against the tax liability for the entire tax year on the departing alien’s annual U.S. income tax return.
- Separate from Expatriation Tax. The payment of taxes listed on a Form 1040-C is separate from the expatriation tax for green card holders. Lawful permanent resident aliens (green card holders) with no definite plans to return to the U.S. must notify the Department of Homeland Security of their termination of residency and file Form 8854, Initial and Annual Expatriation Information Statement, with the IRS if they (a) plan to surrender their green card, and (b) have been a lawful permanent resident in at least 8 taxable years during the previous 15 taxable years, including the taxable year during which they surrender their green card.
- S. Taxation, In General. U.S. tax matters can be particularly complicated for nonresident aliens, defined as any individual who is not a U.S. citizen or a U.S. national who has not passed the green card test, or the substantial presence test. More information can be found here and here. It is highly advised that an experienced, competent tax professional or advisor be consulted with regards to U.S. tax matters.
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