Code §6851(d)(1) provides:
No alien shall depart from the United States unless he first procures from the Secretary [of the Treasury] a certificate that he has complied with all the obligations imposed upon him by the income tax laws.1
Thus, with certain exceptions, resident aliens and nonresident aliens who physically leave the U.S. are required to obtain certificates from the IRS that they have complied with all U.S. income tax obligations. This certificate often is referred to as the “sailing permit.”
Forms 1040-C & 2063
A sailing permit can be obtained by filing one of two forms with an IRS district office. Form 1040-C, U.S. Departing Alien Income Tax Return, is used by aliens leaving the U.S. to report both income received and income reasonably expected to be received during the tax year. Form 2063, U.S. Departing Alien Income Tax Statement, is filed by departing aliens with no taxable income or by resident aliens who will be returning to the U.S. and whose tax liabilities are current. The filing of one of these forms does not relieve an alien of the obligation to file an income tax return (1040 or 1040NR) as required by law.
The instructions to Form 1040-C advise that you should get your sailing permit at least 2 weeks before you plan to leave. However, the instructions also state that you cannot apply earlier than 30 days before your planned departure date.
Not all departing aliens have to obtain a sailing permit. Some, such as diplomatic representatives of foreign countries and their families are exempted.2 Others, such as tourists, business visitors, crews on foreign transportation carriers, students, and industrial trainees, are exempted based on the transitory nature of their stay in the U.S.3 A resident alien who intends to maintain a U.S. residence is not eligible for these exceptions.
Documents Required to Obtain Certificate
As discussed in IRS Publication 519, U.S. Tax Guide for Aliens, an alien seeking a sailing permit is supposed to bring several records to the district office including:
- Copies of U.S. income tax returns filed for the past 2 years and receipts for taxes paid on those returns;
- Receipts, bank records, cancelled checks, and other documents that support deductions, business expenses, and exemptions claimed on the returns;
- Employer statements showing wages paid and taxes withheld from January 1 of the current year to date of departure, if the alien was an employee; and
- A profit-and-loss statement prepared for the period from January 1 of the current year to the date of departure, if the alien was self-employed.
If it is determined that the alien owes any tax, he or she must either (1) pay that tax, (2) post a bond acceptable to the IRS, or (3) submit a letter from the alien’s employer guaranteeing payment of the tax.
Very Few Forms Are Filed
Despite the requirement to obtain a sailing permit, in practice aliens who leave the U.S. generally do not obtain one.4 The number of forms filed requesting sailing permits has decreased substantially over the past decades. The GAO has reported that the number of Form 1040-C forms filed dropped from about 176,000 in calendar year 1960 to 1,245 in fiscal year 1986.5 About 1,000 Forms 1040-C were filed for 2006.6
Neither the IRS nor the U.S. Customs and Immigration Service have enforced the sailing permit requirement for departing aliens for decades.7 The IRS does not even monitor compliance with the sailing permit requirement.
According to the GAO, the fact that few individuals file sailing permits and that the IRS does not enforce the filing requirement may not represent a significant compliance risk.8 Tax withholding is generally required on payments of U.S.-source income to nonresident aliens.9 Such withholding reduces the chance that nonresidents will depart the country without paying taxes owed. Furthermore, although foreign employers may not withhold U.S. taxes on U.S-source income payments made to nonresidents, those individuals may not have substantial tax liabilities because of tax treaties. At least 78% of admissions to the U.S. in fiscal year 2007 were of individuals residing in countries with which the U.S. had a tax treaty.10
1. This law has been in place since 1921. GAO Report, April 1988, Opportunities Exist for Improving IRS’ Administration of Alien Taxpayer Programs (http://www.gao.gov/assets/150/146362.pdf, last visited on December 27, 2016).
4. Page 22, GAO Report, April 2010, IRS May Be Able to Improve Compliance for Nonresident Aliens and Updating Requirements Could Reduce Their Compliance Burden (http://www.gao.gov/assets/310/303328.pdf, last visited on December 27, 2016).
10. GAO Report, April 2010, IRS May Be Able to Improve Compliance for Nonresident Aliens and Updating Requirements Could Reduce Their Compliance Burden (http://www.gao.gov/assets/310/303328.pdf, last visited on December 27, 2016).