Form 1040-ES (NR): Estimated Tax for Nonresident Aliens – Tax Year 2021 Checklist
Understanding Your Estimated Tax Obligations
Form 1040-ES (NR) enables nonresident aliens to calculate and pay quarterly estimated taxes on U.S.-source income not subject to withholding. This specialized form addresses the unique tax situation of nonresident aliens who receive income effectively connected with a U.S. trade or business or fixed, determinable, annual, or periodical income without adequate tax withholding.
Step-by-Step Filing Process
Step 1: Determine If You Must Make Estimated Tax Payments
You must make estimated tax payments for 2021 if both conditions apply:
- Condition One: You expect to owe at least $1,000 in federal tax after subtracting withholding and refundable credits.
- Condition Two: Your withholding and refundable credits will be less than the smaller of two amounts: 90% of the tax shown on your 2021 return or 100% of the tax shown on your 2020 return (if your 2020 return covered all 12 months).
Who Must File
Nonresident aliens engaged in a U.S. trade or business must file Form 1040-NR regardless of whether they have income from that business. Estimated tax payments become necessary when income and withholding trigger the threshold requirements.
Nonresident aliens not engaged in U.S. trade or business but receiving U.S.-source income from dividends, interest, royalties, or other fixed payments must file if not all tax was withheld at source.
Step 2: Apply Special Rules That Modify Standard Requirements
Farmers and Fishermen
If at least two-thirds of your gross income for 2020 or 2021 comes from farming or fishing, substitute 66.67% for the standard 90% threshold. You may pay all estimated tax by January 18, 2022, or file your complete 2021 Form 1040-NR by March 1, 2022, and pay the total tax due without owing underpayment penalties.
Higher Income Taxpayers
If your 2020 adjusted gross income exceeded $150,000 (or $75,000 if married filing separately), substitute 110% for 100% when calculating the safe harbor based on the prior year’s tax. This stricter requirement applies only to the prior year comparison; the current year’s 90% test remains unchanged.
Household Employment Taxes
Include household employment taxes in your estimated tax calculation if you will have federal income tax withheld from wages, pensions, or annuities, or if you would be required to make estimated payments even without household employment taxes.
Step 3: Understand Filing Status Restrictions
Nonresident aliens cannot make joint estimated tax payments with a spouse under any circumstances. Each spouse must calculate and pay their own separate amount. You cannot file as married filing jointly or head of household. Most nonresident aliens use Schedule X (Single) for estimated tax calculations. Married nonresident aliens must use Schedule Y (Married Filing Separately) unless specific exceptions apply under IRS Publication 519.
Individuals in registered domestic partnerships, civil unions, or similar relationships that are not marriages under state law cannot make joint estimated tax payments. They may only take credit for payments they personally made.
Step 4: Calculate Your Adjusted Gross Income
Enter the adjusted gross income you expect for 2021 on line 1 of the Estimated Tax Worksheet. When calculating expected AGI, account for the deduction for self-employment tax, which equals 50% of your net self-employment earnings.
If you have self-employment income, multiply your net self-employment profit by 0.9235 to calculate net earnings after the deductible portion of self-employment tax. Subtract this deduction when determining your expected AGI.
Step 5: Determine Your Deductions
Personal Exemption and Itemized Deductions
Nonresident aliens cannot claim the standard deduction. For 2021, you may claim one personal exemption of $4,300 if you cannot be claimed as a dependent on another person’s tax return.
You may only claim itemized deductions that are directly connected with income effectively connected to a U.S. trade or business. Allowable deductions include state and local income taxes on U.S.-source income, charitable contributions to U.S. organizations (limited to those associated with U.S. income), casualty and theft losses related to U.S. property, and miscellaneous deductions related to U.S. business activities.
Qualified Business Income Deduction
If you qualify for the Section 199A deduction for qualified business income from a qualified trade or business, enter the estimated amount on line 2b of the worksheet.
Step 6: Calculate Tax on Effectively Connected Income
Subtract your allowable deductions and personal exemption from your AGI to determine taxable income. Use the appropriate 2021 Tax Rate Schedule to calculate tax:
Schedule X (Single):
- 10% on income up to $9,950
- 12% on income $9,951 to $40,525
- 22% on income $40,526 to $86,375
- 24% on income $86,376 to $164,925
- 32% on income $164,926 to $209,425
- 35% on income $209,426 to $523,600
- 37% on income over $523,600
Schedule Y (Married Filing Separately):
- 10% on income up to $9,950
- 12% on income $9,951 to $40,525
- 22% on income $40,526 to $86,375
- 24% on income $86,376 to $164,925
- 32% on income $164,926 to $209,425
- 35% on income $209,426 to $314,150
- 37% on income over $314,150
Step 7: Calculate Self-Employment Tax
For 2021, the self-employment tax applies to net earnings from self-employment exceeding $400. The Social Security wage base limit is $142,800. Calculate self-employment tax by multiplying your net self-employment income by 0.9235, then applying:
- 12.4% for Social Security on earnings up to $142,800
- 2.9% for Medicare on all earnings
- Additional 0.9% Medicare tax on earnings exceeding $200,000 (single) or $250,000 (married filing jointly) or $125,000 (married filing separately)
The combined self-employment tax rate is 15.3% on earnings up to the Social Security wage base.
Step 8: Add Other Taxes
Include additional taxes such as the Alternative Minimum Tax, Additional Medicare Tax on high earners, and Net Investment Income Tax if applicable. Consult the 2020 Form 1040-NR instructions to determine which additional taxes apply to your situation.
Step 9: Calculate Tax on Income Not Effectively Connected
Fixed, determinable, annual, or periodical income not effectively connected with a U.S. trade or business is taxed at a flat 30% rate on gross income with no deductions allowed. Enter your expected 2021 FDAP income and multiply by 30%, or use Schedule NEC (Form 1040-NR) if any income qualifies for a reduced tax treaty rate. FDAP income includes interest, dividends, rents, royalties, and similar passive investment income.
Step 10: Apply Tax Treaty Benefits
If you qualify for reduced withholding rates under a U.S. tax treaty, use Schedule NEC to calculate the treaty-reduced rate instead of the standard 30% rate. You must answer all questions on Schedule OI (Form 1040-NR) regarding tax treaty claims. Identify the treaty country, specific treaty articles, months you claimed benefits in prior years, and the amount of exempt income. Attach Form 8833 if required to disclose treaty-based positions.
Step 11: Calculate Total Estimated Tax
Add your tax on effectively connected income and tax on FDAP income to determine your total 2021 estimated tax. Subtract any applicable refundable credits, including additional child tax credit (if eligible), fuel tax credit, net premium tax credit, and refundable credits from Form 8885.
Child Tax Credit Eligibility
Nonresident aliens may claim the child tax credit only if they are residents of Canada, Mexico, or U.S. nationals. The qualifying child must have a valid Social Security number. Most nonresident aliens filing Form 1040-NR are not eligible for the enhanced child tax credit provisions enacted under the American Rescue Plan Act.
Step 12: Determine Your Required Annual Payment
Calculate your required annual payment using safe harbor tests. Multiply your total estimated tax by 90% (or 66.67% for farmers and fishermen). This represents 90% of your current year’s liability.
Calculate your required payment based on the prior year’s tax by using the tax shown on line 24 of your 2020 Form 1040-NR, adjusted for specific items. If your 2020 AGI exceeded $150,000 (or $75,000 if married filing separately), use 110% of your 2020 tax instead of 100%. Your required annual payment is the smaller of these two amounts. This minimum must be prepaid through estimated payments to avoid underpayment penalties.
Step 13: Determine Your Payment Schedule
For Nonresident Aliens with Wage Withholding
If you have wages subject to U.S. income tax withholding, you may pay all estimated tax by April 15, 2021, or divide it into four equal payments due:
- April 15, 2021
- June 15, 2021
- September 15, 2021
- January 18, 2022
You do not need to make the January 18, 2022, payment if you file your complete 2021 Form 1040-NR by January 31, 2022, and pay the entire balance due.
For Nonresident Aliens without Wage Withholding
If you do not have wages subject to U.S. income tax withholding, you may pay all estimated tax by June 15, 2021, or pay in three installments:
- One-half by June 15, 2021
- One-quarter by September 15, 2021
- One-quarter by January 18, 2022
Step 14: Choose Your Payment Method
Submit estimated tax payments using any approved method.
Electronic Options: IRS Direct Pay (free online payment from bank account), Electronic Federal Tax Payment System (EFTPS) with enrollment, IRS online account access, IRS2Go mobile app, credit or debit card through authorized processors (fees apply).
Mail Option: Complete the payment voucher from Form 1040-ES (NR) and mail it with a check or money order payable to “United States Treasury.” Write “2021 Form 1040-ES (NR)” and your Social Security number or Individual Taxpayer Identification Number on your payment.
Step 15: Complete Payment Vouchers Correctly
If paying by mail, print or type your name, address, and identification number on the payment voucher. Enter only the payment amount in the designated box. Do not include any overpayment from 2020 in this amount, though you should account for it in your calculations. Enclose your payment, but do not staple it to the voucher.
The IRS does not send reminder notices for estimated tax payments. You are solely responsible for tracking due dates and ensuring timely submission.
Step 16: Adjust Payments If Circumstances Change
If your income, deductions, or tax situation changes significantly during 2021, recalculate your estimated tax using a new worksheet. Adjust subsequent quarterly payments to reflect the updated liability.
If you receive income unevenly throughout the year due to seasonal business operations or large capital gains, consider using the annualized income installment method explained in Publication 505. This method may help you avoid or reduce underpayment penalties. If you use this method, file Form 2210 with Schedule AI when you file your 2021 return.
Step 17: Understand Underpayment Penalties
You may owe an underpayment penalty if you did not pay enough tax during the year, even if you receive a refund when filing your return. The penalty is calculated separately for each quarterly period based on the underpayment amount, the period duration, and published quarterly interest rates.
Safe Harbor Protection
You avoid underpayment penalties if you meet either condition: Your filed return shows you owe less than $1,000 in total tax, or you paid at least 90% of the current year’s tax or 100% of the prior year’s tax (110% if your 2020 AGI exceeded $150,000 or $75,000 if married filing separately), whichever is less.
Penalty Waivers
The IRS may waive penalties if your underpayment resulted from casualty, disaster, or unusual circumstances, or if you retired after age 62 or became disabled during 2021 or 2020, and the underpayment was due to reasonable cause. Request a waiver by filing Form 2210 with a written explanation under penalty of perjury.
Step 18: Report Payments When Filing Your Return
When filing your 2021 Form 1040-NR in 2022, report all estimated tax payments made during 2021 on the designated line. The IRS will verify these payments against its records.
If you overpaid through combined estimated payments and withholding, you will receive a refund or may apply the excess to your 2022 estimated tax. If you underpaid, you will owe the balance plus potential penalties and interest.
Key Reminders for 2021
- The Social Security wage base increased from $137,700 in 2020 to $142,800 in 2021, affecting self-employment tax calculations. Personal exemption amount for 2021 is $4,300 for those not claimed as dependents on another return.
- Nonresident aliens must distinguish between effectively connected income (taxed at graduated rates) and FDAP income (taxed at a flat 30% rate unless treaty-reduced).
- Tax treaty benefits require proper documentation and disclosure on Schedule OI and potentially Form 8833.
- Joint estimated tax payments are never permitted for nonresident aliens.
- Standard deduction is not available to nonresident aliens filing Form 1040-NR.
By carefully following these steps and meeting all quarterly payment deadlines, you can ensure compliance with federal estimated tax obligations and avoid costly underpayment penalties for tax year 2021.
Need Help With Your Tax Filing?
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
We offer:
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Call now before filing: (888) 260-9441
Fast transcript pull available
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.
