For Australians with U.S. tax ties, including employees, investors and business owners, the 2026 question is simple: did anything change? We compared the current form and instructions with the prior versions. This article covers what changed, who is affected and how to prepare. It is general information, not tax advice.
Key Takeaways
- Form 1040-C remains the January 2024 version for 2026 filings.
- The January 2026 instructions update figures such as the standard deduction and AMT exemption.
- Form 1040-C is not Schedule C and does not replace your final Form 1040 or 1040-NR.
- Check eligibility, departure timing, records and payment before you book an IRS appointment.
What Form 1040-C Is and Who Uses It
What Form 1040-C does
The form reports a departing alien's income received and expected through departure, plus the expected tax, if any. It is an interim filing. Your annual return still settles the final liability.
Who may need it
Non-exempt resident and nonresident aliens who need clearance use Form 1040-C, unless they qualify for Form 2063. No exemption is based on Australian nationality alone. Under Publication 519, exempt groups include:
- Diplomatic representatives and their qualifying household members
- Employees of international organisations or foreign governments with only exempt compensation
- Specified students, trainees and exchange visitors (F, H, J and Q categories) with only permitted income
- Vocational students (M-1/M-2) with only authorised income
- Specified temporary visitors, generally with no taxable income
- Canadian and Mexican commuters whose wages are subject to U.S. withholding
Form 2063 is a simpler route with no tax computation. It applies to aliens with no taxable income through departure and in the preceding year, or to resident aliens with taxable income whose departure will not hinder collection. Outstanding required returns and tax must be filed and paid first.
Form 1040-C versus Schedule C
Form 1040-C handles departing-alien tax compliance. Standalone Schedule C reports profit or loss from a sole proprietorship or an owner's disregarded single-member LLC. You may meet both in one tax situation, but neither replaces the other. Form 1040-C also has its own Schedule C for itemised deductions, which is easy to mix up with the sole-proprietorship form.
What Changed for Form 1040-C in 2026?
The form itself
The form remains the January 2024 revision, which is continuous-use; a separate 2026 redesign does not appear on the current Form 1040-C. The only difference from the January 2023 version is that page 1, Part I, item 13 dropped "gift" from the digital-asset question. That is not a 2026 change.
Instruction updates
The January 2026 instructions, compared with January 2025, change several figures:
| Item | January 2025 | January 2026 |
|---|---|---|
| Standard deduction, single/separate | $15,000 | $16,100 |
| Standard deduction, head of household | $22,500 | $24,150 |
| Standard deduction, joint | $30,000 | $32,200 |
| AMT exemption, general | $88,100 | $90,100 |
| AMT phaseout begins, general | $626,350 | $500,000 |
| Social Security wage base | $176,100 | $184,500 |
| First 10% bracket ends, single | $11,925 | $12,400 |
The AMT phaseout threshold falls even though the 2026 PDF uses the word "increased". Do not apply 2026 tax rate schedules to 2025 tax.
Law changes and administration
The January instructions say casualty losses cover federally declared disasters only. An IRS correction says P.L. 119-21 makes the deduction permanent and, from 2026, adds qualifying state-declared disasters, subject to other section 165 requirements.
Filing procedure is unchanged. Page review dates on IRS pages are not new-rule dates.
What stayed the same
- Form 1040-C does not replace the annual return
- Payments made are credited against final liability
- Accurate income reporting and record retention still apply
- Filing is by paper, original plus one copy, through an in-person appointment
In short, this is updated instructions and figures, not a new tax obligation.
Who Is Affected by the 2026 Updates?
Resident and nonresident aliens
Residents are generally taxed on worldwide income and use Group I. Nonresidents use Group II for effectively connected income or Group III for other income, where a 30% rate is shown unless supporting computation shows less.
Green card and substantial presence tests set tax residency, not visa labels. Departure years can be dual-status.
Australians with U.S. tax obligations
An Australian citizen, employee, investor or owner leaving the U.S. may need individual advice. An Australian company does not file Form 1040-C simply because it has U.S. business activity.
The U.S.-Australia treaty may matter, but only provision by provision:
- Employment: the Article 15 exception needs all three conditions, including no more than 183 days. Day count alone is not enough
- Dividends: generally a 15% source-tax ceiling for individual portfolio holders
- Interest: generally 10%, with specified exemptions
- Real property: may be taxed where the property sits
Report in USD using spot rates on the relevant dates, applied consistently. The IRS yearly table lists AUD 1.551 per US$1 for 2025 and no 2026 average.
Green card holders ending U.S. residence
A long-term resident generally means lawful permanent residence in 8 of the last 15 tax years. Termination can trigger expatriation reporting on Form 8854, which certifies five years of compliance.
Physical departure alone is not the stated trigger. The 2026 instructions send expatriating former long-term residents to Form 8854 with their 2026 return.
First-time filers and those leaving soon
Those most affected include:
- First-time filers
- Anyone still using an older form
- People with complex income
- Those departing shortly
Check the revision date and allow time for missing records, appointment availability and prior-year issues.
How to Prepare and File Form 1040-C in 2026
Confirm eligibility and timing
- Confirm tax residency and departure date.
- Check prior-year return and tax compliance.
- Test exemptions and whether Form 2063 fits.
- Book a local IRS Taxpayer Assistance Center appointment by calling 844-545-5640.
File no earlier than 30 days, and at least 2 weeks, before departure. Some offices may lack appointments in that window.
Gather documents and calculate
- Passport, visa or alien registration card, taxpayer ID, proof of departure date
- Previous 2 years' U.S. returns and tax payment receipts
- Wage and withholding statements; self-employment income and expenses to departure
- Deduction, dependant, property-sale and estimated-payment records
- Scholarship and treaty-benefit documents
Calculations use income received through departure and expected income. If you are returning to the U.S., the entire year is required. Line 27 credits tax withheld at source, and line 28 covers estimated payments.
Complete and submit
Complete the correct taxpayer group, attach records and bring two copies. Generally pay the tax shown and any prior-year tax at filing, in certified funds such as a cashier's cheque, certified money order or cash, subject to local options. Confirm with the IRS whether e-filing is available; Form 1040-C is generally filed in person.
An authorised agent signs the compliance section. The signed copy, or the detached Form 2063 certificate, is your permit. The IRS says it should be issued immediately when documents are available and tax is paid, but that is not guaranteed. If processing slips past your departure, contact the office early.
After you leave
Form 1040-C credits against your annual liability. There is no departure-time refund; any refund comes via the final return. Year-end residency decides whether you file Form 1040 or 1040-NR, and a dual-status return may be required.
Avoid errors and get support
Common errors:
- Using the wrong or an outdated form
- Omitting expected income
- Misjudging resident versus nonresident status
- Missing prior-year returns
- Confusing Form 1040-C with Schedule C
Australians with cross-border U.S. tax needs may consider support from tax and accounting professionals such as VJM Global, which prepares Forms 1040 and 1040-NR. Confirm first that the firm offers the specific Form 1040-C service you need. No outcome or IRS representation is assured.
Frequently Asked Questions
Is Schedule C for sole proprietors?
Yes. It reports business income or loss from a sole proprietorship and generally an individual-owned single-member LLC. It is separate from Form 1040-C.
Where is Schedule C income reported on Form 1040?
On the 2026 draft, Schedule C line 31 flows to Schedule 1 line 3. On the final 2025 forms, Schedule 1 total line 10 goes to Form 1040 line 8. Drafts are not for filing. This does not describe Form 1040-C.
What is Form 1040-C used for?
It is the U.S. Departing Alien Income Tax Return. It reports received and expected income and tax before an eligible foreign national leaves.
Who needs to file Form 1040-C?
Non-exempt resident and nonresident aliens needing clearance, unless Form 2063 or an exemption applies. Check your facts against the 2026 instructions.
Is Form 1040-C a final tax return?
No. You must still file the appropriate annual return after year-end, which reconciles actual income and tax.
Can Form 1040-C be filed electronically?
Form 1040-C is filed as a paper original and copy at an appointment. A standard IRS e-filing option is not listed for this form.
