General Instructions

Changes To Note

For details on these and other changes that may affect your 2003 Federal income tax, see Pub. 553, Highlights of 2002 Tax Changes.

Child and dependent care credit.   You may be able to take a credit of up to $1,050 for the expenses you pay for the care of one qualifying person; $2,100 if you pay for the care of two or more qualifying persons.

Lifetime learning credit.   The maximum lifetime learning credit for 2003 is $2,000.

Adoption credit.   The maximum credit allowed is $10,160 per child. The credit is allowed only if your modified adjusted gross income (AGI) is less than $192,390. If you adopt a child with special needs and the adoption becomes final in 2003, you may be able to take the maximum credit regardless of your actual expenses.

Exclusion of employer-provided adoption benefits.   You may be able to exclude up to $10,160 of employer-provided adoption benefits from income for each child. The exclusion is allowed only if your modified AGI is less than $192,390.

Section 179 expense deduction.   Generally, the maximum deduction to expense certain property under section 179 for 2003 is $25,000.

IRA deduction allowed to more people.   You may be able to take an IRA deduction if you were covered by a retirement plan and your 2003 modified AGI is less than $50,000 ($70,000 if married filing jointly or qualifying widow(er)).

Self-employed health insurance deduction.   You may be able to deduct up to 100% of your health insurance expenses.

Estimated tax safe harbor for some taxpayers.   The estimated tax safe harbor that is based on the tax shown on your 2002 tax return is 110% of that amount if you are not a farmer or fisherman and the AGI shown on that return is more than $150,000 or, if married filing separately for 2003, $75,000.

Standard mileage rate.   The 2003 rate for business use of a vehicle has decreased to 36 cents a mile. The rate for use of your vehicle to get medical care or for deductible moving expenses has decreased to 12 cents a mile.

Purpose of Form

Form 1040-C is used by aliens who intend to leave the United States to:

• Report income received or expected to be received for the entire tax year and
• If required, to pay the expected tax liability on that income.

Form 1040-C must be filed before an alien leaves the United States. For more information, see How To Get the Certificate on page 2.

If you are a nonresident alien, use the 2002 Instructions for Form 1040NR, U.S. Nonresident Alien Income Tax Return, to help you complete Form 1040-C.

If you are a resident alien, use the 2002 Instructions for Form 1040, U.S. Individual Income Tax Return, to help you complete Form 1040-C.

You can get tax forms, instructions, and publications from the Internal Revenue Service (IRS). See Additional information below.

Alien status rules.   If you are not a citizen of the United States, specific rules apply to determine if you are a resident or nonresident alien. Intent is not important in determining your residency status.

You are considered a resident alien if you meet either the green card test or the substantial presence test. However, even though you may otherwise meet the substantial presence test, you will not be considered a U.S. resident if you qualify for the closer connection to a foreign country exception or you are able to qualify as a nonresident alien by reason of a tax treaty. These tests and the exception are discussed in the instructions for Part I on page 3.

Additional information.   For more information on taxation of resident and nonresident aliens, residency tests, and other special rules, get:

• Pub. 519, U.S. Tax Guide for Aliens.
• Pub. 901, U.S. Tax Treaties.

In the United States, you can get tax forms, instructions, and publications from the IRS by calling 1-800-829-3676. You can also download them from the IRS Web Site at www.irs.gov.

Treaty Benefits

If you take the position that a treaty of the United States overrides or modifies any provision of the Internal Revenue Code and that position reduces (or potentially reduces) your tax, you must file Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), with your final U.S. income tax return. See Pub. 519 for more information.

Final Return Required

A Form 1040-C is not a final return. You must file a final income tax return after your tax year ends.

If you are a U.S. citizen or resident alien on the last day of the year, you should file Form 1040 reporting your worldwide income. If you are not a U.S. citizen or resident alien on the last day of the year, you should generally file Form 1040NR or, if eligible, Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents. However, certain individuals who were resident aliens at the beginning of the tax year but nonresident aliens at the end of the tax year must file a dual-status return. See Dual-status tax year on page 4.

Any tax you pay with Form 1040-C counts as a credit against tax on your final return. Any overpayment shown on Form 1040-C will be refunded only if and to the extent your final return for the tax year shows an overpayment.

Certificate of Compliance

Note:   The issuance of a certificate of compliance is not a final determination of your tax liability. If it is later determined that you owe more tax, you will have to pay the additional tax due.

Form 1040-C or Form 2063.   If you are an alien, you should not leave the United States or any of its possessions without getting a certificate of compliance from your IRS Field Assistance Area Director on Form 1040-C or Form 2063, U.S. Departing Alien Income Tax Statement, unless you meet one of the Exceptions below.

You may file the shorter Form 2063 if you have filed all U.S. income tax returns you were required to file, you paid any tax due, and either 1 or 2 below applies.

1. You have no taxable income for the year of departure and for the preceding year (if the time for filing the earlier year's return has not passed).
2. You are a resident alien with taxable income for the preceding year or for the year of departure, but the Area Director has decided that your leaving will not hinder collecting the tax.

Exceptions.   You do not need a certificate of compliance if:

1. You are a representative of a foreign government who holds a diplomatic passport; a member of the representative's household; a servant who accompanies the representative; an employee of an international organization or foreign government whose pay is exempt from U.S. taxes; or a member of the employee's household who was not paid by U.S. sources. However, if you signed a waiver of nonimmigrants' privileges as a condition of holding both your job and your status as an immigrant, this exception does not apply, and you must get a certificate.
2. You are a student, industrial trainee, or exchange visitor, or the spouse or child of such an individual. To qualify for this exception, you must have an F-1, F-2, H-3, H-4, J-1, J-2, or Q visa. Additionally, you must not have received any income from sources in the United States other than:
   • Allowances covering expenses incident to your study or training in the United States (including expenses for travel, maintenance, and tuition),
   • The value of any services or accommodations furnished incident to such study or training,
   • Income from employment authorized under U.S. immigration laws, or
   • Interest on deposits, but only if that interest is not effectively connected with a U.S. trade or business.
3. You are a student, or the spouse or child of a student, with an M-1 or M-2 visa. To qualify, you must not have received any income from sources in the United States other than:
   • Income from employment authorized under U.S. immigration laws or
   • Interest on deposits, but only if that interest is not effectively connected with a U.S. trade or business.
4. Any of the following applies:
   • You are on a pleasure trip and have a B-2 visa.
   • You are on a business trip, have a B-1 visa or a combined B-1/B-2 visa, and do not stay in the United States or any of its possessions for more than 90 days during the tax year.
   • You are an alien passing through the United States or any of its possessions, including travel on a C-1 visa or under a contract, such as a bond agreement, between a transportation line and the U.S. Attorney General.
   • You are an alien admitted on a border-crossing identification card.
   • You do not need to carry passports, visas, or border-crossing identification cards because you are visiting for business or pleasure and do not stay in the United States or any of its possessions for more than 90 days during the tax year.
   • You are a resident of Canada or Mexico who commutes frequently to the United States to work and your wages are subject to income tax withholding.
   • You are a military trainee admitted for instruction under the Department of Defense and you will leave the United States on official military travel orders.

   However, exception 4 does not apply if the Area Director believes you had taxable income during the tax year, up through your departure date, or during the preceding tax year and that your leaving the United States would hinder collecting the tax.

How To Get the Certificate

To get a compliance certificate, go to your local IRS office at least 2 weeks before you leave the United States and file either Form 2063 or Form 1040-C and any other tax returns that have not been filed as required. The certificate may not be issued more than 30 days before you leave. If both you and your spouse are aliens and are leaving together, both of you must go to the IRS office.

Please be prepared to furnish your anticipated date of departure and bring the following records with you if they apply.

1. A valid passport with your alien registration card or visa.
2. Copies of your U.S. income tax returns filed for the past 2 years. If you were in the United States for less than 2 years, bring copies of the income tax returns you filed for that period.
3. Receipts for income taxes paid on these returns.
4. Receipts, bank records, canceled checks, and other documents that prove your deductions, business expenses, and dependents claimed on the returns.
5. A statement from each employer you worked for this year showing wages paid and tax withheld. If you are self-employed, you must bring a statement of income and expenses up to the date you plan to leave.
6. Proof of any payments of estimated tax for the past year and the current year.
7. Documents showing any gain or loss from the sale of personal property, including capital assets and merchandise.
8. Documents concerning scholarship or fellowship grants, such as: (a) verification of the grantor, source, and purpose of the grant; (b) copies of the application for, and approval of, the grant; (c) a statement of the amount paid, and your duties and obligations under the grant; and (d) a list of any previous grants.
9. Documents indicating qualification for special tax treaty benefits.

If you are filing Form 1040-C, file an original and one copy for the tax year in which you plan to leave. If the Area Director has made a termination assessment against you, include on your Form 1040-C any income you expect to receive through the departure date during the tax year. If you received a termination assessment and then received additional income during the current tax year, the Area Director may make additional assessments. If the Area Director has not made a termination assessment against you, include on your Form 1040-C any income you have received and expect to receive during the entire tax year of departure.

Generally, a compliance certificate on Form 1040-C will be issued without your paying tax or posting bond if you have not received a termination assessment. This certificate applies to all of your departures during the current tax year, subject to revocation on any later departure if the Area Director believes your leaving would hinder collecting the tax.

If you owe income tax and the Area Director determines that your departure will jeopardize the collection of the tax, a compliance certificate on Form 1040-C will be issued only when you pay the tax due or post bond, and the certificate will apply only to the departure for which it is issued.

If you go to the departure point without a certificate or proof that you do not need one, you may be subject to an income tax examination by an IRS employee. You will then have to complete the returns and any other required documents and either pay any income tax due or post bond.

Specific Instructions

Joint return.   Nonresident aliens may not file a joint return. Resident aliens may file a joint return on Form 1040-C only if both of the following apply.

1. The alien and his or her spouse can reasonably expect to be eligible to file a joint return at the close of the tax period for which the return is made.
2. If the tax period of the alien is terminated, the tax period of his or her spouse is terminated at the same time.

If Form 1040-C is filed as a joint return, both spouses should enter their names, identification numbers, and passport or alien registration card numbers in the spaces provided on page 1 of the form. Also, both spouses should include their income in Part III and furnish the information requested in Part I of the form. If necessary, a separate Part I should be completed for each spouse.

Identifying number.   You are generally required to enter your social security number (SSN). To apply for an SSN, get Form SS-5 from a Social Security Administration (SSA) office or you may call the SSA at 1-800-772-1213. Fill in Form SS-5 and return it to the SSA.

If you do not have an SSN and are not eligible to get one, you must get an individual taxpayer identification number (ITIN). To apply for an ITIN, file Form W-7 with the IRS. It usually takes about 4-6 weeks to get an ITIN. Enter your ITIN wherever your SSN is requested on your tax return. If you are required to include another person's SSN on your return and that person does not have and cannot get an SSN, enter that person's ITIN.

Note:   An ITIN is for tax use only. It does not entitle you to social security benefits or change your employment or immigration status under U.S. law.

Line A.   If your employer is willing to furnish a letter guaranteeing that the tax will be paid, check the Yes box. You only need to sign the form and leave the remainder blank. Be sure to attach the letter from your employer to Form 1040-C. The letter should state specifically the period and type of tax covered.

Part I - Explanation of Status - Resident or Nonresident Alien

Generally, you are considered a resident alien if you meet either the green card test or the substantial presence test for 2003. You are considered a nonresident alien for the year if you do not meet either of these tests. For more information on resident and nonresident alien status, see Pub. 519.

Green card test.   You are a resident alien for tax purposes if you are a lawful permanent resident of the United States at any time during 2003. You are a lawful permanent resident of the United States if you have been given the privilege, under U.S. immigration laws, of residing permanently in the United States as an immigrant. You generally have this status if the Immigration and Naturalization Service (INS) has issued you an alien registration card, also known as a green card.

Substantial presence test.   You are considered a resident alien for tax purposes if you meet the substantial presence test for 2003. You meet this test if you were physically present in the United States for at least:

• 31 days during 2003 and
• 183 days during the period 2003, 2002, and 2001, counting all the days of physical presence in 2003, 1/3 of the number of days of presence in 2002, and 1/6 of the number of days in 2001.

Days of presence in the United States.   Generally, you are treated as present in the United States on any day that you are physically present in the country at any time during the day. However, you do not count the following days of presence in the United States for purposes of the substantial presence test.

• Days you regularly commuted to work in the United States from a residence in Canada or Mexico.
• Days you were in the United States for less than 24 hours while you were traveling between two places outside the United States.
• Days you were temporarily present in the United States as a regular member of the crew of a foreign vessel engaged in transportation between the United States and a foreign country or a possession of the United States. This rule does not apply to any day you were otherwise engaged in a trade or business in the United States.
• Days you intended, but were unable, to leave the United States because of a medical condition or medical problem that developed while you were in the United States.
• Days you were an exempt individual. In general, an exempt individual is: (a) a foreign-government-related individual, (b) a teacher or trainee, (c) a student, or (d) a professional athlete who is temporarily present in the United States to compete in a charitable sports event.

Note:   If you qualify to exclude days of presence in the United States because you are an exempt individual (other than a foreign-government- related individual) or because of a medical condition or problem, file Form 8843, Statement for Exempt Individuals and Individuals With a Medical Condition, with your final income tax return.

Closer connection to a foreign country exception.   Even though you would otherwise meet the substantial presence test, you are not treated as having met that test for 2003 if you: (a) were present in the United States for fewer than 183 days during 2003, (b) establish that during 2003 you had a tax home in a foreign country, and (c) establish that during 2003 you had a closer connection to one foreign country in which you had a tax home than to the United States unless you had a closer connection to two foreign countries.

Note:   If you meet this exception, file Form 8840, Closer Connection Exception Statement for Aliens, with your final income tax return.

Residence determined by tax treaty.   Even though you would otherwise meet the substantial presence test, you are not treated as having met that test if you qualify as a resident of another country within the meaning of the tax treaty between the United States and that other country.

Dual-status tax year.   Generally, if you are a resident alien and you leave the United States during the year with no intent to return, you have a dual-status tax year and are subject to dual-status restrictions in completing Form 1040-C. A dual-status tax year is one in which you have been both a resident alien and a nonresident alien. In figuring your income tax liability, different U.S. income tax rules apply to each status. See the Form 1040NR instructions for details.

Note:   Certain resident aliens who leave the United States during the year with no intent to return may owe tax under section 877. These resident aliens must take into account any amounts due for 2003 under section 877 when completing Form 1040-C. See Expatriation Tax in Pub. 519 for more information.

Income effectively connected with a U.S. trade or business - nonresident aliens.   If you are a nonresident alien, the tax on your income depends on whether the income is or is not effectively connected with a U.S. trade or business.

Income effectively connected with a U.S. trade or business (including wages earned by an employee) is taxed at the graduated rates that apply to U.S. citizens and resident aliens. Income you receive as a partner in a partnership or as a beneficiary of an estate or trust is considered effectively connected with a U.S. trade or business if the partnership, estate, or trust conducts a U.S. trade or business.

Income from U.S. sources that is not effectively connected with a U.S. trade or business is generally taxed at 30%. Your rate may be lower if the country of which you are a resident and the United States have a treaty setting lower rates. See Pub. 901 for more details.

For a list of the types of income not considered effectively connected with a U.S. trade or business, see the instructions for Schedules A and B beginning on page 5. If you are a nonresident alien in the United States to study or train, see Pub. 519.

First | Next

Instructions Index | 2002 Tax Help Archives | Tax Help Archives | Home