Form 1040-ES (NR): U.S. Estimated Tax for Nonresident Alien Individuals (2017)

What Form 1040-ES (NR) Is For

Form 1040-ES (NR) is the payment voucher package nonresident aliens use to figure and pay estimated taxes to the IRS throughout 2017. Estimated tax is the method used to pay tax on income that is not subject to withholding—essentially, a pay-as-you-go system for income where no one automatically withholds taxes for you.

The form serves nonresident alien individuals who have U.S. source income that escapes withholding at the source. This commonly includes self-employment income, investment income, rental income, or other earnings not covered by standard payroll tax withholding. The package includes worksheets to calculate your estimated liability, payment vouchers for mailing quarterly payments, and detailed instructions on meeting your obligations without facing penalties.

Unlike U.S. citizens and residents who use Form 1040-ES, nonresident aliens face unique rules. Your estimated tax calculation covers only income effectively connected with a U.S. trade or business, plus certain investment income taxed at flat rates. The form helps you determine whether you must make estimated payments, calculate how much to pay, and provides four payment vouchers corresponding to the quarterly due dates throughout the year.

When You’d Use Form 1040-ES (NR)

Initial Filing

You must use Form 1040-ES (NR) for 2017 if both of these conditions apply: (1) you expect to owe at least $1,000 in tax after subtracting withholding and refundable credits, and (2) you expect your withholding and credits to be less than the smaller of 90% of your 2017 tax or 100% of your 2016 tax (110% if your 2016 adjusted gross income exceeded $150,000, or $75,000 for married filing separately). Special percentages apply to farmers and fishermen—they can substitute two-thirds (66⅔%) for the 90% threshold.

Amended Payments

If your income, deductions, or tax situation changes significantly during the year, you should amend your estimated payments. To amend, recalculate your total estimated tax liability using the worksheet, then determine new payment amounts for remaining installments. The IRS doesn't require you to file an amended form—simply adjust your upcoming payment amounts. However, if a prior period's payment becomes insufficient because of your amendment, you may face penalties when filing your annual return. If you start receiving taxable income after March 31, 2017, that requires estimated payments, use the annualized income installment method described in IRS Publication 505 and file Form 2210 with your tax return to avoid or minimize penalties.

Late Situations

If you miss a payment deadline, make the payment as soon as possible to limit penalty accumulation. Penalties accrue daily on underpaid amounts. While the IRS doesn't send payment reminders, catching up quickly reduces the penalty calculation when you file your 2017 Form 1040NR.

Key Rules or Details for 2017

Who Must Pay

Nonresident aliens engaged in a U.S. trade or business, or those with insufficient withholding on U.S. source income, generally must make estimated payments if they meet the threshold requirements. You're excluded from the requirement if your only U.S. income comes from wages fully subject to withholding and you owe less than $1,000 in additional tax.

Payment Schedule—Two Different Calendars

Your payment calendar depends on whether you have wages subject to U.S. income tax withholding. With wages subject to withholding, you make four equal installments due April 18, June 15, and September 15 of 2017, plus January 16, 2018. Without such wages, you can pay everything by June 15, 2017, or split it into three installments due June 15, September 15, and January 16.

Special Waiver for Fourth Payment

You can skip the January 16, 2018 payment entirely if you file your complete 2017 Form 1040NR or 1040NR-EZ by January 31, 2018, and pay any remaining balance in full with that return.

Higher Income Taxpayer Rule

If your 2016 adjusted gross income exceeded $150,000 ($75,000 for married filing separately), you must pay 110% (not 100%) of your prior year's tax to use the safe harbor that avoids underpayment penalties. This rule doesn't apply to farmers and fishermen.

Safe Harbor Provision

Meeting the payment thresholds described above creates a safe harbor—even if you ultimately owe more tax when filing your return, you avoid underpayment penalties as long as you paid the required minimum through withholding and estimated payments.

Self-Employment and Social Security Agreement

If you're covered under a U.S. international social security agreement with your country of residence, you must include self-employment tax in your estimated tax calculation. Use 92.35% of your net profit from self-employment when calculating this tax.

Step-by-Step (High Level)

Step 1—Determine If You Must Pay

Review the general rule requirements. Calculate your expected 2017 tax liability and compare it against your expected withholding. If you'll owe less than $1,000 after withholding, or your withholding will cover the safe harbor threshold (90% of current year or 100%/110% of prior year), you don't need to make estimated payments.

Step 2—Complete the Estimated Tax Worksheet

Using your 2016 tax return as a guide, project your 2017 adjusted gross income, deductions, exemptions, and credits. Calculate your expected tax using the 2017 tax rate schedules provided with the form. Include self-employment tax if applicable, alternative minimum tax if you expect to owe it, and other special taxes. Don't forget to account for income not effectively connected with a U.S. trade or business, which gets taxed at flat rates (typically 30%, though treaty rates may apply).

Step 3—Calculate Payment Amounts

Subtract expected withholding from your total estimated tax. Divide the remaining amount by four (or three, depending on your payment schedule). Record any 2016 overpayment you're applying to 2017 and subtract portions from each installment as appropriate.

Step 4—Choose a Payment Method and Submit

You can pay electronically through IRS Direct Pay, debit or credit card (with convenience fees), Electronic Federal Tax Payment System (EFTPS), or by mailing a check or money order with the payment voucher. Electronic payment is strongly encouraged—it's faster, more secure, and provides immediate confirmation. If mailing payment, write your identifying number (SSN, ITIN, or EIN) and "2017 Form 1040-ES (NR)" on your check or money order. Mail to: Internal Revenue Service, P.O. Box 1300, Charlotte, NC 28201-1300 U.S.A.

Step 5—Track Your Payments

Use the Record of Estimated Tax Payments table included in the form package. Note the date, amount, confirmation number, and any overpayment credits applied for each installment. Keep these records with your tax files—you'll need them when completing your 2017 Form 1040NR.

Step 6—Reconcile When Filing Your Annual Return

Your estimated payments (plus withholding) are credited against your actual tax liability on Form 1040NR. Overpayments are refunded or applied to 2018, while underpayments must be paid with your return, possibly with penalties added.

Common Mistakes and How to Avoid Them

Missing Payment Deadlines

The IRS doesn't send reminders, and penalties accrue daily on late or insufficient payments. Mark all four due dates on your calendar as soon as you determine you must pay estimated tax. Consider setting reminders two weeks before each deadline to ensure you have time to process payment.

Forgetting to Include All Applicable Taxes

Many nonresident aliens calculate only income tax but forget to include self-employment tax, alternative minimum tax, or household employment taxes in their estimated payments. Carefully review the worksheet instructions for lines 11 and 12 to identify all taxes you must include. If you have net earnings from self-employment of $400 or more and live in a country with a U.S. social security agreement, you must include self-employment tax.

Failing to Adjust for Income Changes

If your income increases significantly mid-year—perhaps from a large capital gain, contract work, or rental income—your original estimated payments may become inadequate. Rather than waiting until year-end, recalculate your estimated tax and increase remaining payments. Using the annualized income installment method can help you avoid or reduce penalties when income arrives unevenly throughout the year.

Applying Wrong Tax Rates

Income not effectively connected with a U.S. trade or business generally faces 30% withholding, but tax treaties often provide reduced rates (15% for dividends, for example). Make sure you use the correct treaty rate for your situation and attach Form 8833 if required. Don't assume treaty benefits apply automatically—verify your eligibility and provide proper documentation.

Incorrectly Using Prior Year Safe Harbor

Higher-income taxpayers (2016 AGI over $150,000) must pay 110% of their prior year's tax to use the safe harbor—not 100%. Using the wrong percentage leaves you vulnerable to penalties. Also, if your 2016 tax year was less than 12 full months, you cannot use the prior year safe harbor at all.

Confusing “Married Filing Separately” Status

For estimated tax purposes, your filing status is married filing separately if you will check boxes 3, 4, or 5 on Form 1040NR or box 2 on Form 1040NR-EZ. This status affects your safe harbor percentage if you're a higher-income taxpayer and changes your tax rate schedule. Be certain you use the correct filing status throughout your calculations.

Not Keeping Payment Records

Without proper documentation of when and how much you paid, reconciling your return becomes difficult, and you might lose credit for payments you actually made. Use the Record of Estimated Tax Payments table in the form package to log every payment immediately after making it, including confirmation numbers for electronic payments.

What Happens After You File

No Reminders From IRS

After you make each estimated payment, you receive confirmation (immediate for electronic payments, or the canceled check serves as proof for mailed payments), but the IRS doesn't send reminders about upcoming payments. You remain responsible for remembering all due dates and making timely payments throughout the year.

Payments Are Tracked Against Your SSN/ITIN

Each payment you make is electronically recorded against your Social Security Number or Individual Taxpayer Identification Number. When you file Form 1040NR for 2017, you'll report the total amount of estimated tax paid, and the IRS will match this against their records.

Reconciliation at Year-End

When you file your 2017 Form 1040NR (generally due April 17, 2018, or June 15, 2018, depending on your wage situation), you report all estimated tax payments on line 63. These payments, combined with any withholding shown on line 62, are credited against your total tax liability. If you overpaid, you receive a refund or can apply the overpayment to 2018 estimated tax. If you underpaid, you must pay the balance due, and you may owe an underpayment penalty.

Penalty Assessment

If you didn't pay enough estimated tax or missed payment deadlines, the IRS calculates an underpayment penalty when processing your return. The penalty is interest-based and accrues separately for each payment period based on how much you underpaid and for how long. This penalty can apply even if your return shows an overpayment for the year overall. The penalty may be waived under certain circumstances detailed in Publication 505, chapter 4, such as casualty, disaster, or unusual circumstances.

Form 2210 May Be Required

If you used the annualized income installment method because your income arrived unevenly during the year, you must file Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, with your return even if no penalty is owed. This form demonstrates that your payment schedule matched your actual income flow.

Applying Overpayments Forward

Any overpayment from your 2017 return can be refunded to you or applied to your 2018 estimated tax. If you choose to apply it to 2018, that amount is automatically treated as an estimated tax payment. Make sure to account for this credit when calculating your 2018 quarterly payment amounts to avoid overpaying.

FAQs

Can I make more than four estimated tax payments during the year?

Yes, you can make additional payments beyond the standard quarterly schedule. Simply make a copy of an unused payment voucher, complete it, and mail it with your payment, or use electronic payment methods any time. Just ensure the total amount paid during each payment period meets the required minimum for that period to avoid penalties.

What if I discover I made an error in calculating my estimated tax?

You don't need to file an amended Form 1040-ES (NR). Instead, recalculate your estimated tax using the worksheet, determine new payment amounts for remaining installments, and adjust your upcoming payments accordingly. If your correction means you underpaid an earlier installment, you may face a penalty when filing your annual return, but catching the error early and paying more in later installments helps minimize that penalty.

Do tax treaty benefits automatically reduce my estimated tax obligation?

No. While tax treaties may provide reduced rates or exemptions on certain income types, you must properly claim treaty benefits by providing appropriate documentation to withholding agents and, when required, filing Form 8833 with your tax return. When calculating estimated tax, use the treaty rate that applies to your specific situation based on your residence country and the type of income involved.

If I'm leaving the United States permanently during 2017, do I still need to make estimated tax payments?

Yes, but your obligations change. You may need to file Form 1040-C (departing alien income tax return) and pay any tax due before leaving. Any estimated tax payments made before departure will be credited toward your final tax liability. Consult the instructions for Form 1040-C for specific requirements regarding your departure.

How do I handle estimated taxes if I'm both self-employed and have wages with withholding?

Calculate your total expected tax liability including self-employment tax, then subtract expected withholding from your wages. You might be able to avoid or reduce estimated tax payments by asking your employer to withhold additional amounts from your paycheck using Form W-4. This can be simpler than making quarterly estimated tax payments.

What happens if my tax situation changes dramatically—like I suddenly have no income in the last quarter?

You can reduce or skip later estimated tax payments if your income decreases significantly. However, be cautious: if you underpay, penalties may apply. Consider using the annualized income installment method (described in Publication 505) which allows you to match payment amounts to the income you actually received in each quarter, potentially avoiding penalties despite uneven income.

I missed the first estimated tax payment deadline. Should I still start making payments?

Absolutely. Start making the remaining payments immediately using the payment schedule appropriate for when you begin. While you'll likely owe a penalty for the missed period(s) when you file your return, continuing to make proper payments going forward limits the penalty amount and prevents it from growing larger. You cannot completely eliminate the penalty by paying extra later, but you can prevent additional penalties on future periods.

This guide is based on the 2017 Form 1040-ES (NR) and related instructions published by the Internal Revenue Service. For the most current information and updates, visit IRS.gov/form1040esnr.

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