Form 1040-ES(NR): 2017 Estimated Tax Guide for Nonresident Aliens
Overview
Form 1040-ES(NR) enables nonresident aliens to calculate and remit quarterly estimated tax payments on income not subject to withholding. For 2017, this form is used by nonresident alien individuals, estates, and trusts that earn U.S. source income or income effectively connected with a U.S. trade or business. The Tax Cuts and Jobs Act suspended personal exemptions this year, marking the final year they were available.
Understanding Nonresident Alien Status
Nonresident aliens are foreign nationals who fail to meet either the green card test or the substantial presence test. The substantial presence test requires at least 31 days in the U.S. during 2017, plus 183 days over three years, calculated as 100% of the 2017 days, 33% of the 2016 days, and 17% of the 2015 days. Exempt individuals include foreign government officials with A or G visas, teachers and trainees on J or Q visas, and students on F, J, M, or Q visas who comply with visa requirements.
Income Classification
Effectively Connected Income
Income effectively connected with U.S. trade or business is taxed at graduated rates from 10% to 39.6% after allowable deductions. This includes U.S. business profits, inventory sales, rental real property (if elected), gains from the sale of U.S. real property, scholarships for services provided by F, J, M, or Q visa holders, and partnership income from a U.S. business.
Non-Effectively Connected Income
Fixed, determinable, annual, or periodical income is subject to a flat 30% tax rate or a lower treaty rate, with no deductions. This includes passive interest and dividends, passive rental income, and gambling winnings. Items on Schedule NEC should not appear elsewhere on the return.
Step-by-Step Filing Process
Step 1: Determine If Estimated Tax Is Required
You must make estimated tax payments if you expect to owe at least $1,000 after subtracting withholding and credits, and your withholding and credits will be less than the smaller of 90% of your 2017 tax or 100% of your 2016 tax. You are exempt if you were a nonresident alien for all of 2016 with zero tax liability.
Step 2: Apply Higher Income Rules
If your 2016 adjusted gross income exceeded $150,000, or $75,000 if married filing separately, use 110% of the 2016 tax instead of 100% when calculating required payments. This rule does not apply to farmers or fishermen.
Step 3: Determine Farmer and Fisherman Status
You qualify if at least two-thirds of your 2016 or 2017 gross income came from farming or fishing. Use 67% instead of 90% when calculating required payments. You can pay all estimated tax by January 16, 2018, if you file Form 1040-NR by March 1, 2018, and pay all tax due.
Step 4: Calculate Expected Income and Deductions
Enter the expected 2017 adjusted gross income on line 1. Enter estimated itemized deductions on line 2. Nonresident aliens generally must itemize and cannot claim the standard deduction, except for Indian students and business apprentices who are eligible under U.S.-India treaty provisions. Subtract deductions from income and enter on line 3.
Step 5: Calculate Personal Exemptions
Multiply $4,050 by the number of personal exemptions claimed and enter on line 4. This was the final year for personal exemptions before they were suspended through 2025. Subtract exemptions from line 3 to calculate line 5.
Step 6: Calculate Tax Using 2017 Rates
Calculate tax on line 5 using Schedule X (Single): 10% on $0-$9,325; 15% on $9,325-$37,950; 25% on $37,950-$91,900; 28% on $91,900-$191,650; 33% on $191,650-$416,700; 35% on $416,700-$418,400; 39.6% over $418,400. Different schedules apply for other filing statuses. Enter on line 6.
Step 7: Add Alternative Minimum Tax and Credits
Add the alternative minimum tax from Form 6251 on line 7. Add other taxes expected on line 8. Subtract credits on line 9, including foreign tax credit, child tax credit if eligible, and retirement savings contributions credit. Calculate line 10 by subtracting line 9 from line 8.
Step 8: Calculate Self-Employment Tax
If you have net self-employment earnings of at least $400, calculate self-employment tax. Multiply net income by 92.35%. The 2017 Social Security wage base is $127,200. Apply 12.4% Social Security tax up to this limit and 2.9% Medicare tax on all earnings. Total rate is 15.3%. Enter on line 11.
Step 9: Include Other Taxes
Enter other taxes on line 12, including household employment taxes if you pay household workers at least $2,000 in wages, additional Medicare tax of 0.9% on wages exceeding $200,000 for single or $250,000 for married filing jointly, and net investment income tax of 3.8% when modified AGI exceeds these thresholds.
Step 10: Calculate Total Estimated Tax
Add lines 10 through 12 to calculate the total tax on effectively connected income, and enter the total on line 13. Enter expected non-effectively connected income on line 14. Multiply line 14 by 30% or a lower treaty rate and enter the result on line 15. Add lines 13 and 15 on line 16a. Subtract refundable credits on line 16b. Calculate total estimated tax on line 16c.
Step 11: Determine Required Annual Payment
Multiply line 16c by 90% and enter on line 17a. Use 67% for farmers and fishermen. Calculate prior year requirement on line 17b using 100% of 2016 tax, or 110% if 2016 AGI exceeded $150,000. Enter the smaller of line 17a or 17b on line 17c.
Step 12: Calculate Installment Amounts
Enter expected withholding on line 18. Subtract line 18 from line 17c on line 19a. If you have wage withholding, divide line 19a by four for each quarterly installment. If no withholding and the first payment is due June 15, enter one-half on the first voucher and one-quarter on each subsequent voucher.
Step 13: Make Payments on Due Dates
First payment: April 18, 2017, for income January 1 through March 31.
Second payment: June 15, 2017, for income April 1 through May 31.
Third payment: September 15, 2017, for income June 1 through August 31.
Fourth payment: January 16, 2018, for income September 1 through December 31, 2017.
Fiscal year taxpayers pay on the 15th day of the 4th, 6th, and 9th months of the current fiscal year and the 1st month of the following year.
Step 14: Complete Payment Vouchers
Use the vouchers provided with Form 1040-ES (NR) if you are paying by check or money order. Print your name, address, and Social Security number or ITIN. If filing jointly, include your spouse’s information in the same order as on your return. Enter the payment amount in the box. Write “2017 Form 1040-ES(NR)” and your identifying number on the check. Do not staple payment to the voucher.
Step 15: Maintain Records
Keep accurate records of all payments using the Record of Estimated Tax Payments table. Document dates, amounts, and overpayment credits applied. If you change your name and made payments under a former name, attach a statement to your 2017 return showing all payments and identifying numbers used.
Step 16: Understand Penalties
You may owe an underpayment penalty if you did not pay enough estimated tax or missed payment dates. Avoid the penalty if you owe less than $1,000 or have paid at least 90% of the 2017 tax or 100% of the 2016 tax, whichever is less. Higher-income taxpayers must pay 110% of their 2016 tax.
Step 17: Amend If Necessary
To amend the estimated tax, refigure using the 2017 Estimated Tax Worksheet. Calculate remaining payments by consulting Publication 505, Chapter 2. If seasonal income or significant capital gains occur late in the year, consider using the annualized income installment method, as outlined in Form 2210 with Schedule AI.
Important 2017 Provisions
Personal exemption: $4,050 per exemption, applicable in the final year before suspension.
Social Security wage base: $127,200.
Self-employment tax: 15.3% on 92.35% of net income.
Additional Medicare tax: 0.9% on wages exceeding $200,000 single or $250,000 married filing jointly.
Net investment income tax: 3.8% when modified AGI exceeds these thresholds.
Household employment threshold: $2,000 in wages.
Tax rates on effectively connected income: 10% to 39.6%.
Non-effectively connected income: a flat 30% or lower treaty rate.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
