Posted by: Steven Toscher | April 13, 2018

Tax Problem for Departing Aliens by Steven Toscher

The regulations[1] require that no alien, whether resident or non-resident, can depart from the United States unless he or she first procures a certificate that he or she has complied with the obligations imposed upon him or her by the income tax laws.[2] Failure to do so may result in a termination assessment.

Certain types of individuals, however, are not required to obtain a certificate of compliance. These include:

(1)        employees of foreign governments or international organizations;

(2)        alien students and industrial trainees admitted on F or H-3 visas, respectively, who have limited income (as defined by the regulations); and

(3)        other aliens temporarily in the United States.

The last category includes an alien visitor for pleasure admitted solely on a B-2 visa; an alien visitor for business admitted on a B-1 visa; an alien in transit to the United States or any of its possessions on a C-1 visa; an alien admitted to the United States on a border-crossing identification card or regarding whom passport visas and border identification cards are not required, if that alien is a visitor for pleasure, if that alien is a visitor for business who does not remain in the United States or its possessions for a period exceeding ninety days during the taxable year, or if that alien is in transit through the United States or its possessions; an alien military trainee admitted to the United States; and, finally, an alien resident of Canada or Mexico who commutes between that country and the United States at frequent intervals for employment and whose wages are subject to the withholding of tax.[3]

Note that holders of a Permanent Resident Card (“ a Green Card”) are not excused from this regulation.

Except for the above individuals, every alien departing the country must obtain a certificate of compliance wherein the district director determines whether the alien’s departure jeopardizes the collection of any income tax. If the district director finds that the departure of the alien will result in jeopardy, the taxable period of the alien will be terminated and the alien will be required to file returns and make payment for the shortened tax period. If the district director finds that the departure of the alien does not result in jeopardy, the alien will be required to file a statement on Form 2063, U.S. Departing Alien Income Tax Statement,[4] but will not be required to pay income tax before the usual time for payment.[5]  See I.R.S. Publication 519 (U.S. Tax Guide for Aliens) for more details.

The intended departure of an alien who is a resident of the United States or a U.S. possession and who intends to continue that residence will not be treated as resulting in jeopardy and, therefore, will not require a termination of the alien’s taxable year, unless the district director has information indicating that the alien intends by his or her departure to avoid payment of income taxes. With a non-resident alien or a resident alien discontinuing residence, the fact that the alien intends to depart from the United States will justify termination of the taxable period unless the alien establishes that he or she intends to return to the United States and that his or her departure will not jeopardize the collection of any taxes. The determination is to be made on a case-by-case basis. Evidence tending to establish the nonexistence of jeopardy from the departure includes showing that the alien is engaged in a trade or business in the United States or that the alien leaves enough property in the United States to secure payment of his or her income tax for the taxable year.[6]

Every alien required to obtain a certificate of compliance, whether a resident or a nonresident, whose taxable period is terminated upon departure because of jeopardy is required to file with the district director a return in duplicate on Form 1040C, U.S. Departing Alien Income Tax Return,[7] for the short taxable period resulting from the termination. Income received and reasonably expected to be received through the taxable period, during and including the date of departure, must be stated. Moreover, other income tax returns due but not filed must be submitted.[8]

Upon compliance with the foregoing requirements and payment of the income tax required to be shown on the return and of any income tax due and owing for prior years, the departing alien will be issued a certificate of compliance. The departing alien can postpone payment of the tax required to be shown on the return until the usual time of payment by furnishing a bond.[9]

STEVEN TOSCHER – For more information please contact Steven Toscher – toscher@taxlitigator.com Mr. Toscher is a principal at Hochman, Salkin, Rettig, Toscher & Perez, P.C., specializing in civil and criminal tax litigation. Mr. Toscher is a Certified Tax Specialist in Taxation, the State Bar of California Board of Legal Specialization and represents clients throughout the United States and elsewhere involving federal and state, civil and criminal tax controversies and tax litigation. Additional information is available at http://www.taxlitigator.com

 

[1] Treas. Reg. § 1.6851-2.

[2] See Pub. 519 (U. S. Tax Guide for Aliens).

[3] Id.

[4] Available at www.irs.gov.

[5] Treas. Reg. § 1.6851-2(b)(1).

[6] Id.

[7] Available at www.irs.gov.

[8] Treas. Reg. § 1.6851-2(b)(3)(iii).

[9] Id.


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