IRS Requests Comments on Departing Alien and Penalty Forms

IRS Opens Comment Period for Compliance Forms

The IRS is soliciting public input on the paperwork burden associated with two information collections, with comments due by March 9, 2026. These collections relate to Form 2063, U.S. Departing Alien Income Tax Statement, which can act as a "sailing permit" for certain departing aliens, and the reporting requirements for fines and penalties. While these requests are routine under the Paperwork Reduction Act, the underlying forms are critical for tax compliance in their respective areas.

Form 2063: The 'Sailing Permit' for Departing Aliens

The IRS is also seeking comments on Form 2063, U.S. Departing Alien Income Tax Statement, a document often referred to as a "sailing permit" or "departure permit." This form plays a crucial role in ensuring tax compliance for certain individuals leaving the United States.

Specifically, Form 2063 is used by two categories of departing aliens: resident aliens against whom the IRS has not made a termination assessment under Section 6851, and nonresident aliens who have no taxable income from U.S. sources.

To understand this, it's crucial to grasp the concept of a termination assessment under Section 6851. Section 6851 allows the IRS to immediately assess income tax when it believes a taxpayer is taking actions that would jeopardize the collection of income tax, such as preparing to quickly leave the country or conceal assets. In such cases, the IRS can declare the taxpayer's taxable period terminated and demand immediate payment. If a termination assessment has been made, the alien would need to file Form 1040-C, U.S. Departing Alien Income Tax Return.

Form 2063, on the other hand, certifies that departing aliens without a termination assessment have complied with U.S. income tax laws. It allows them to leave the country without the immediate need to settle potential tax liabilities, provided certain conditions are met. The form essentially acts as proof of compliance.

The IRS estimates approximately 20,540 responses annually for Form 2063. The notice indicates that there is no change to the paperwork burden previously approved by the Office of Management and Budget (OMB), suggesting a continuation of the existing procedures. The estimated time per response is 50 minutes, resulting in a total annual burden of 17,049 hours.

Tracking Corporate Fines: The 1098-F Connection

Following the notice regarding Form 2063, the IRS also announced a request for comments on the information collection associated with OMB Control No. 1545–2284. This control number pertains to Form 1098-F, Fines, Penalties, and Other Amounts, and its associated reporting requirements under IRC Section 6050X.

Section 6050X, enacted as part of the Tax Cuts and Jobs Act of 2017 (TCJA), requires governmental entities to report information about certain fines, penalties, and other amounts paid due to violations of law. This reporting requirement is directly linked to IRC Section 162(f), which generally disallows deductions for fines and penalties paid to a government or governmental entity for the violation of any law.

Here's why this matters to businesses:

• No Deduction: Businesses cannot deduct many fines and penalties.
• Information Reporting: Form 1098-F is how the IRS tracks these payments, creating a potential audit trigger for businesses claiming deductions the IRS believes are disallowed.
• Reporting Threshold: If the aggregate amount a payor is required to pay pursuant to a suit or agreement equals or exceeds $50,000, the government entity must file Form 1098-F.

The IRS is seeking comments on this information collection, likely to ensure the form and its instructions are clear and that the reporting burden is minimized. This impacts any business that has paid, or may pay, significant fines or penalties to governmental entities, as well as the governmental entities themselves responsible for the reporting.

Practitioner Takeaways: Deadlines and Stakeholders

As the IRS seeks comments on these information collections, several stakeholders should take note, particularly those involved with global mobility and corporate compliance.

Regarding Form 2063, the U.S. Departing Alien Income Tax Statement, global mobility practices will want to examine the form and instructions to ensure clarity for their clients. Form 2063 is used by departing resident aliens against whom a termination assessment under Section 6851 has not been made, or a departing nonresident alien who has no taxable income from United States sources, to certify that they have satisfied all U.S. income tax obligations. Taxpayers potentially subject to Section 6851 are those whom the IRS believes are designing to depart the United States quickly, remove or conceal property, or perform any act to render tax collection ineffective. Therefore, this form and any changes to it directly impacts these groups.

On the other hand, Form 1098-F, Fines, Penalties, and Other Amounts, affects corporate compliance departments and government entities. This form is related to Section 6050X, added by the Tax Cuts and Jobs Act of 2017 (TCJA), which requires government entities to report certain payments made by taxpayers regarding violations of law because of the revised rules of Section 162(f), which generally denies deductions for fines and penalties paid to governments. These entities must understand their reporting obligations when the aggregate amount a payor is required to pay pursuant to a suit or agreement equals or exceeds $50,000.

Written comments on both forms should be received on or before March 9, 2026, to be assured of consideration. Direct all written comments to Andres Garcia, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or by email to pra.comments@irs.gov. Include ‘‘OMB Control No. 1545–0138’’ in the subject line for Form 2063 and ‘‘OMB Control No. 1545–2284’’ for Form 1098-F.