What IRS Form 1040-EZ (NR) (2021) Is For
IRS Form 1040-EZ (NR) (2021) is intended for a nonresident alien who must report taxable income earned from U.S. source income during the tax year and file an income tax return with the Internal Revenue Service. This form helps determine federal income tax, tax liability, and taxes withheld when taxable income is limited and straightforward. It allows the filer to report income, credits, and eligible adjustments, enabling them to calculate their total tax correctly before submitting the return.
When You’d Use IRS Form 1040-EZ (NR) (2021)
A filer uses this form when specific circumstances require reporting income or making estimated tax payments for the current year.
- Insufficient taxes withheld: A filer uses this form when taxes withheld from wages or other income are not enough to meet their expected federal income tax liability for the tax year, and they must make estimated tax payments to avoid penalties.
- Receiving income without withholding: A filer uses this form when they earn FDAP income or effectively connected income, such as capital gains, interest, dividends, or wages, that are not subject to tax withholding and must be reported on their income tax return for the current year.
- Additional taxable income during the year: A filer uses this form when they expect taxable income from multiple sources and need to estimate quarterly estimated tax payments to meet filing requirements and avoid underpayment.
- Relying on treaty reductions: A filer uses this form when a tax treaty affects their taxable income or lowers the treaty rate, and they must determine how deductions and credits, as well as prior tax year rules, may impact their final tax liability.
Key Rules or Details for the 2021 Tax Year
A filer must understand several rules before completing IRS Form 1040-EZ (NR) (2021).
- Separate nonresident filing requirement: A filer must use this form only if they qualify as a nonresident alien for tax purposes during the 2021 tax year and meet Internal Revenue Service filing requirements for U.S. source income.
- Rules for calculating total tax: A filer must calculate total tax using graduated rates and include other taxes, such as self-employment tax or taxes that apply to the taxable part of their income for the entire year.
- Restrictions on joint return filing: A filer cannot file a joint return unless allowed under a specific tax treaty and must file form entries separately when nonresident alien rules require individual reporting.
- Requirements for Withholding Adjustments: A filer may need to adjust how they withhold tax if the wages or other income taxes withheld do not match the expected tax for the current tax year.
- Rules for Prior Tax Year Comparisons: A filer may compare the prior year's tax to the current year's expected tax liability, allowing them to use safe harbor thresholds based on previous year totals when available.
Step-by-Step (High Level)
A filer follows a precise sequence of actions when preparing IRS Form 1040-EZ (NR) (2021) for the current tax year.
- Gather income and withholding figures: A filer collects income statements, withholding information, and supporting documents so they can calculate taxable income and ensure that all earnings and taxes withheld are reported accurately for the calendar year.
- Estimate taxable income and credits: A filer calculates taxable income by subtracting eligible deductions and credits from total earnings so they can determine the estimated tax liability for federal income tax purposes.
- Determine estimated payments for each period: A filer divides their estimated tax across the required due dates to make timely quarterly payments and avoid penalties.
- Choose a payment method that suits their situation: A filer pays taxes using electronic transfers, mailed payments, or other Internal Revenue Service-approved options, ensuring each payment is processed with the correct identifying information.
- Record each payment for the tax return: A filer keeps records of payments, confirmation numbers, and dates so they can accurately report credits and fees when they file Form 1040 or Form 1040-NR for the following year.
Common Mistakes and How to Avoid Them
A filer can avoid several frequent errors when completing IRS Form 1040-EZ (NR) (2021).
- Missing required due dates: Filers avoid penalties by marking all quarterly due dates early and submitting each estimated payment on time, ensuring no period remains unpaid.
- Using incorrect income figures: Filers avoid underpayment by including accurate taxable income from wages, investment earnings, and self-employment, so the estimated tax reflects their actual financial situation.
- Ignoring withholding mismatches: Filers prevent unexpected balances due by adjusting withholding when taxes withheld do not align with expected income taxes for the year.
- Overlooking deductions and credits: Filers avoid inaccurate estimates by reviewing all eligible deductions and credits to ensure they calculate estimated payments correctly.
- Misusing prior tax year data: Filers avoid mistakes by confirming whether previous year income or tax liability qualifies for safe harbor rules before relying on those figures for estimated payments.
What Happens After You File
After IRS Form 1040-EZ (NR) (2021) is submitted, the Internal Revenue Service processes the income tax return and compares taxable income, payments, and credits reported for the year. The IRS verifies federal income tax, estimated fees, and taxes withheld before issuing a refund or determining a remaining balance due. Any confirmed payment is applied to the filer’s account, and unused amounts may be carried forward to the following year. The filer should retain all records to facilitate the resolution of any questions that may arise during processing.
FAQs
Do nonresident aliens need to make estimated tax payments?
A nonresident alien may need to make estimated tax payments when taxes withheld from income will not cover the expected tax liability for the current year.
Can I use IRS Form 1040-EZ (NR) if I have self-employment tax?
A filer with self-employment tax may need to file a different form if their income and tax status fall outside the limits of Form 1040-EZ (NR).
How do taxes withheld affect quarterly estimated tax payments?
Taxes withheld reduce the amount a filer must pay through quarterly estimated tax payments because they count toward the total tax for the year.
Can a tax treaty reduce my estimated tax liability?
A tax treaty may reduce income tax on certain types of income, which can lower estimated payments for a nonresident alien who qualifies under the treaty rules.
What should I do if my taxable income changes during the year?
A filer must update their estimated tax calculations when income increases or decreases to avoid penalties and pay the correct amount of tax for the year.
