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Instructions for Form 1040-C 2003 Tax Year

General Instructions

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

Changes To Note

For details on these and other changes that may affect your 2004 Federal income tax, see Pub. 553, Highlights of 2003 Tax Changes.

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 2004 modified AGI is less than $55,000 ($75,000 if married filing jointly or qualifying widow(er)).

Tuition and fees deduction.   You may be able to take a deduction of up to $4,000 if your 2004 adjusted gross income (AGI) is not more than $65,000 ($130,000 if married filing jointly) or a deduction of up to $2,000 if your 2004 AGI is not more that $80,000 ($160,000 if married filing jointly).

Certain credits no longer allowed against alternative minimum tax (AMT).   The credit for child and dependent care expenses, credit for the elderly or the disabled, education credits, mortgage interest credit, and District of Columbia first-time homebuyer credit will no longer be allowed against AMT. However, the child tax credit, adoption credit, and credit for qualified retirement savings contributions will still be allowed against your AMT.

Health savings accounts.    Beginning in 2004, eligible individuals covered by a high-deductible health insurance plan may be able to open a health savings account (HSA). Within limits, contributions to an HSA are deductible and are excludable if made by the employer of an eligible individual. Earnings from an HSA are tax deferred. Distributions from an HSA for medical expenses are not taxable.

Expired tax benefits.    At the time these instructions went to print, the following benefits were scheduled to expire.
  • Deduction for educator expenses paid or incurred after 2003.
  • District of Columbia first-time homebuyer credit for homes purchased after 2003.
  • Credit for increasing research activities (applies to amounts paid or incurred after June 30, 2004.)

Standard mileage rate.   The 2004 rate for business use of a vehicle has increased to 37½ cents a mile. The rate for use of your vehicle to get medical care or for deductible moving expenses has increased to 14 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 2003 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 2003 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 website 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 for official services is exempt from U.S. taxes and who has no other U.S. source income; 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 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 admitted on a border-crossing identification card.
    • You do not need to carry passports, visas, or border-crossing identification cards because you are (a) visiting for pleasure or (b) visiting for business 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.
  10. Document verifying your date of departure from the United States, such as an airline ticket.
  11. 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 number (ITIN).


Note:

If you are married and reside in a community property state, also bring the above-listed documents for your spouse. This applies whether or not your spouse requires a certificate.

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.

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