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.
1. 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.
2. 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:
3. 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.
4. 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.
5. 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.
6. 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.
7. 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”:
8. 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.
9. 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.
10. 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.