Rev. date: 09/2006
If you are either a resident or a nonresident alien departing the United States, you will usually have to show that you have complied with the U.S. income tax laws before departing from the United States. You do this by obtaining a tax clearance document, commonly called a "Departure Permit" or "Sailing Permit" from the IRS.
Some foreign diplomats, employees of foreign governments, students, trainees and exchange visitors do not need a departure permit. To find out whether you belong in this category, refer to Publication 519
, U.S. Tax Guide for Aliens
If you do not have taxable income, or you are a resident alien who is leaving only temporarily, use Form 2063
to apply for a departure permit. If you are a resident alien leaving the United States with no definite plans to return for the year, you will have to complete Form 1040-C
, U.S. Departing Alien Income Tax Return
, in order to get a departure permit. If you plan to surrender your green card and you have been a lawful permanent resident (green card holder) in at least 8 taxable years during the period of 15 taxable years ending with the taxable year during which you surrender your green card, you must file Form 8854 and notify the Department of Homeland Security of your termination of residency. If you renounce your U.S. citizenship or terminated your long-term resident status after June 3, 2004, you will continue to be treated for federal tax purposes as a citizen or long-term resident of the United States until you (a) give notice of your expatriating act or termination of residency (with the requisite intent to relinquish citizenship or terminate such status) to the Department of State or the Department of Homeland Security, and (b) provide an initial expatriation statement (Form 8854) to the IRS. Additionally, if you are subject to the expatriation tax rules of section 877(a), you are required to file an annual expatriation information statement (Form 8854) with the IRS for 10 tax years after the date of your expatriation.
Note that after June 8, 2008, the law affecting taxpayers who expatriate may be changed as follows. There will be a tax imposed on certain U.S. citizens who relinquish their U.S. citizenship and certain long-term U.S. residents who terminate their U.S. residency. If the law is changed, these individuals are subject to income tax on the net unrealized gain in their property as if the property had been sold for its fair market value on the day before the expatriation or residency termination ("mark to market tax"). Gain from the deemed sale will be taken into account at that time without regard to other provisions of the Internal Revenue Code. Any loss from the deemed sale generally will be taken into account to the extent otherwise provided in the Code. Any net gain on the deemed sale will be recognized to the extent it exceeds $600,000. The $600,000 amount will be increased by a cost of living adjustment factor for calendar years after 2008. Any gains or losses subsequently realized will be adjusted for gains and losses taken into account under the deemed sale rules, without regard to the $600,000 exemption.
The mark-to-market tax described above will apply to most types of property interests held by the individual on the date of relinquishment of citizenship or termination of residency, with certain exceptions. Deferred compensation items, interests in nongrantor trusts, and specified tax deferred accounts will be excepted from the mark-to-market tax but are subject to certain special rules.
In addition, the new law will impose a transfer tax on certain transfers to U.S. persons from certain U.S. citizens who relinquished their U.S. citizenship and certain long-term U.S. residents who terminated their U.S. residency, or from their estates.
The new law, if it becomes law, applies to any U.S. citizen who relinquishes citizenship and any long-term resident who terminates U.S. residency, if such individual ("covered expatriate") (1) has an average annual net income tax liability for the five preceding years ending before the date of the loss of U.S. citizenship or residency termination that exceeds $124,000 (as adjusted for inflation after 2004 - $139,000 in 2008); (2) has a net worth of $2 million or more on such date; or (3) fails to certify under penalties of perjury that he or she has complied with all U.S. Federal tax obligations for the preceding five years or fails to submit such evidence of compliance as the Secretary may require.
The new law provides exceptions to an individual's classification as a covered expatriate due to (1) or (2) above (but not 3) and are provided in two situations. The first exception applies to an individual who was born with citizenship both in the United States and in another country; provided that (1) as of the expatriation date the individual continues to be a citizen of, and is taxed as a resident of, such other country, and (2) the individual has been a resident of the United States (under the substantial presence test of section 7701(b)(1)(A)(ii) for not more than 10 taxable years during the 15-year taxable year period ending with the taxable year of expatriation. The second exception applies to a U.S. citizen who relinquishes U.S. citizenship before reaching age 18 1/2, provided that the individual was a resident of the United States (under the substantial presence test of section 7701(b)(1)(A)(ii) for no more than 10 taxable years before such relinquishment.
A modified Form 8854 will be made available in order for taxpayers to comply with the new law.
Nonresident aliens who have any taxable income will also have to complete Form 1040–C to receive a departure permit. You must pay all tax shown as due on the Form 1040–C unless you furnish a bond guaranteeing payment, or the IRS is satisfied that your leaving will not jeopardize collection of the tax. Any tax you pay counts as a payment on your final return that you file after the end of your tax year.
Apply for the departure permit no earlier than 30 days before you plan to leave. You should apply at least two weeks in advance of your departure. To get your departure permit, visit your nearest Taxpayer Assistance Center (walk–in IRS office). If you are married to an alien who is leaving the country with you, both of you must go to the IRS office. For information on the location of the Taxpayer Assistance Center (walk–in IRS office) nearest to you, call 800–829–1040, or visit www.irs.gov.
You must bring with you all the following records and information for the current year that apply to you:
- A valid passport and your alien registration card or visa,
- Copies of the last two years' U.S. Income Tax Returns with proof of payment of any balances due,
- A statement from each employer showing the wages paid and tax withheld from January 1st to the date of departure (For this statement you can use a payroll deduction slip for your last paycheck if it shows this information),
- If you are self–employed, you must bring a profit and loss statement for the current year to the date of departure,
- Documents showing any gain or loss from the sale of personal property, including capital assets and merchandise,
- Proof of estimated tax payments for the past year and this year,
- Documents concerning scholarships or fellowship grants,
- Documents indicating that you qualify for any special tax treaty benefits,
- Substantiation of deductions for business expenses and itemized deductions claimed,
- Documentation for dependents claimed.
- Document verifying your date of departure from the United States, such as an airline ticket, and
- Document verifying your U.S. taxpayer identification number, such as a social security card or an IRS issued CP 565 showing your individual taxpayer identification (ITIN) number.