I am writing this to share my experience around preparation and learnings while obtaining this permit. Please read the official IRS page on the sailing permit for your preparation. This is not a tax advice, and please consult with your CPA.
The purpose of this permit is to create an agreement between an individual and the IRS around
- accuracy of all the taxes paid for the past two years,
- estimated taxes you owe to the IRS during the US tax residency period of the year of departure.
I decided to obtain this permit for the following reasons
- I left the US at the beginning of 2021 before the 2020 tax filing period, and my estimated 2020 taxes were in considerable amount.
- I had few amendments in progress for the past two years’ taxes with the IRS.
- I was planning to leave a significant amount of money invested in the US market.
The above reasons made me inclined to have an official closure with the IRS to avoid future tax surprises. This official closure came in the form of Form 1040C (not a Form 2063), dually signed by the IRS officer and myself with the agreed-upon estimated tax calculation. You should ask your CPA to prepare Form 1040C for you and understand the calculation behind every number in this form. In my case, throughout my three-hour meeting with the IRS officer, we prepared a new version of Form 1040C with the amended numbers.
Few lessons learned during this process
Remember the following tax numbers for the past two years.
- Taxabale Income
- Tax paid through withholding
- Tax pending or refund amount during filing
IRS does not provide any official receipt of the payment. They match your pending amount from the tax transcript (get those from https://sa.www4.irs.gov/ola/ ) and the bank statement that shows the same amount withdrawal or photocopy of the check you sent them for the tax payment.
Cellphones are not allowed in the IRS building, so you have to carry calculations and notes in the physical form.
Better carry a checkbook to settle any obvious pending taxes during this meeting.
Carry a printout of the meeting appointment.
Note down the name and the officer’s ID number from their display nameplate who processed your case.
Carry a recent bank statement as a proof to show that you have enough amount to pay your estimated taxes.
It is a good idea to download all your tax transcripts for past years before leaving the country.
Good luck everyone,