Form 1040-ES: Estimated Tax for Individuals (2017) - A Complete Guide
What Form 1040-ES Is For
Form 1040-ES is your tool for paying federal income tax throughout the year when taxes aren't automatically withheld from your income. Think of it as the IRS's pay-as-you-go system for people who don't have an employer withholding taxes from every paycheck. The United States tax system operates on a current-year payment principle, which means the government expects to collect taxes as you earn income, not just once a year when you file your return.
This form is essential for self-employed individuals, freelancers, independent contractors, and anyone receiving income from sources like rental properties, interest, dividends, alimony, or capital gains. Even if you receive unemployment compensation or Social Security benefits and don't elect voluntary withholding, you'll need to make estimated tax payments. The form includes worksheets to help you calculate how much you should pay and provides payment vouchers to submit with your quarterly payments. The 2017 version specifically addresses tax rules and rates applicable to income earned during the 2017 tax year.
When You'd Use Form 1040-ES (Including Late and Amended Payments)
You must use Form 1040-ES for 2017 if you expect to owe at least $1,000 in tax after subtracting withholding and refundable credits, AND your withholding and credits will be less than either 90% of your 2017 tax or 100% of your 2016 tax (110% if your 2016 adjusted gross income exceeded $150,000, or $75,000 if married filing separately). There's an important exception: you don't need to pay estimated tax if you had no tax liability for the full 12-month 2016 tax year and were a U.S. citizen or resident alien for all of 2016.
The standard payment schedule divides the year into four periods with due dates of April 18, June 15, and September 15, 2017, plus January 16, 2018. However, if you file your 2017 tax return by January 31, 2018, and pay the entire balance due with that return, you can skip the fourth payment. Special rules apply to farmers and fishermen, who can make just one payment by January 16, 2018, or file their return by March 1, 2018, and pay the full amount due.
If your income changes during the year—perhaps you land a big contract in July or have an unexpected capital gain—you can amend your estimated tax payments. Simply complete a new Form 1040-ES worksheet to recalculate your total estimated tax due, then adjust your remaining quarterly payments accordingly. If you realize you've been paying too much, you can reduce future payments; if you've been paying too little, increase them to avoid penalties. Late payments are possible but will likely result in penalties calculated from the original due date.
Key Rules or Details for 2017
Safe Harbor and Thresholds
The foundational rule is the safe harbor provision: pay at least 90% of your current year's tax or 100% of your prior year's tax (whichever is smaller), and you'll avoid underpayment penalties even if you owe more at filing time. For higher-income taxpayers with 2016 adjusted gross income over $150,000, that percentage increases to 110% of prior year's tax. These percentages change to 66⅔% for farmers and fishermen who derive at least two-thirds of their gross income from farming or fishing.
Due Dates and Special Rules
Estimated tax payments follow a quarterly schedule, though the quarters aren't equal in length. For most taxpayers, payments are due April 18, June 15, September 15, 2017, and January 16, 2018. However, if you file your annual return by January 31 and pay the full balance due, you can skip the January estimated payment entirely. Farmers and fishermen enjoy special flexibility: if two-thirds or more of their gross income comes from farming or fishing, they can make just one payment by January 16 or file their return by March 1 without making any estimated payments.
2017 Deductions, Exemptions, and Self-Employment Tax
When calculating your estimated tax, use the 2017 standard deduction amounts: $6,350 for single or married filing separately, $9,350 for head of household, and $12,700 for married filing jointly or qualifying widow(er). The personal exemption for 2017 remains at $4,050 per person, though this may be reduced for taxpayers with adjusted gross income above $156,900. Self-employment tax applies to 92.35% of your net self-employment earnings, with Social Security tax capping at earnings of $127,200.
Joint Estimated Payments and Name Changes
You cannot make joint estimated tax payments if you or your spouse is a nonresident alien, you're separated under a divorce decree, or you and your spouse have different tax years. If you change your name during the year, attach a statement to your 2017 tax return showing all estimated tax payments made and the names and Social Security numbers under which they were made. Remember to report this name change to the Social Security Administration before filing your return to prevent processing delays.
Step-by-Step (High Level)
How to Use Form 1040-ES for 2017
Step 1: Determine if You Need to Pay
Start by estimating your 2017 income, deductions, credits, and total tax liability using the Estimated Tax Worksheet included with Form 1040-ES. Use your 2016 tax return as a guide but account for any changes in your circumstances. If you expect to owe less than $1,000 after withholding, or if your withholding will cover at least 90% of your current year tax or 100% of your prior year tax, you're exempt from making estimated payments.
Step 2: Calculate Your Payment Amount
Using the worksheet, figure your expected adjusted gross income, subtract your standard or itemized deductions and personal exemptions, then calculate tax using the 2017 Tax Rate Schedules provided with the form. Add self-employment tax and other taxes like Alternative Minimum Tax if applicable, then subtract any credits. The result is your total estimated tax. Subtract any expected withholding to determine your estimated tax payment amount.
Step 3: Divide and Schedule
Divide your total estimated tax payment by four to determine your quarterly payment amount. The form includes four payment vouchers, each pre-printed with a due date. Fill out each voucher with your name, address, Social Security number, and the payment amount for that quarter.
Step 4: Submit Payments
You can pay online through IRS Direct Pay (free), by credit or debit card (convenience fee applies), via Electronic Federal Tax Payment System (EFTPS), by phone, or by mailing a check or money order with the appropriate payment voucher. Online and electronic methods are encouraged for security and faster processing. If mailing payments, use the address specified for your state in the form instructions, and make checks payable to "United States Treasury."
Step 5: Keep Records
Maintain documentation of all payments including dates, amounts, check numbers, and confirmation numbers. The form includes a Record of Estimated Tax Payments table to track this information. These records will be essential when you file your 2017 Form 1040 and claim credit for your estimated tax payments.
Common Mistakes and How to Avoid Them
Underestimating Income Growth
Many taxpayers base their estimated payments solely on last year's income without accounting for raises, new contracts, or investment gains. Review your income quarterly and adjust your payments if you're earning significantly more than projected. Don't wait until year-end to discover you've underpaid.
Forgetting Self-Employment Tax
Self-employed individuals often calculate only income tax and forget that self-employment tax (Social Security and Medicare) can add 15.3% to their tax bill on net earnings. Always use the Self-Employment Tax and Deduction Worksheet included with Form 1040-ES to properly account for this substantial obligation. Remember, only 92.35% of your net self-employment income is subject to this tax, and you can deduct half of the self-employment tax when calculating your adjusted gross income.
Using Outdated Standard Deductions or Exemptions
Tax amounts change annually. For 2017, verify you're using the correct standard deduction ($6,350/$9,350/$12,700 depending on filing status) and personal exemption ($4,050). Using 2016 or older figures will throw off your calculations and potentially lead to underpayment.
Missing the Safe Harbor
Higher-income taxpayers frequently miss that they need to pay 110% (not 100%) of their prior year's tax to qualify for the safe harbor if their 2016 AGI exceeded $150,000. This mistake can result in unexpected penalties even when they thought they'd paid enough based on last year's return.
Mailing Payments to the Wrong Address
Form 1040-ES payments go to specific addresses based on your state of residence—different from where you mail your annual tax return. Using the wrong address delays processing and can result in penalties for "late" payment even though you mailed it on time. Always verify the correct address in the form's instructions and include the P.O. box number exactly as shown.
Ignoring Income Fluctuations
If your income arrives unevenly throughout the year—such as seasonal business, large year-end bonuses, or substantial capital gains late in the year—equal quarterly payments may not reflect when you actually earned the income. Consider using the annualized income installment method (detailed in IRS Publication 505) to match payments to actual income periods and potentially reduce required payments in low-income quarters.
What Happens After You File
Once you make your estimated tax payments, the IRS credits them to your account under your Social Security number. These credits accumulate throughout the year, and when you file your 2017 Form 1040 in early 2018, you'll report the total amount of estimated tax payments on Line 65 of your return. The IRS matches your reported payments against their records to verify accuracy.
If your estimated payments plus withholding exceed your actual tax liability, you'll receive a refund or can elect to apply the overpayment toward your 2018 estimated tax. Conversely, if you underpaid, you'll owe the balance when you file your return. Even if you made all four quarterly payments, you might still owe additional tax if your income was higher than estimated or if you didn't pay enough each quarter.
Underpayment penalties may apply even if you receive a refund on your tax return. The penalty is calculated on each quarterly underpayment for the number of days it remained unpaid, essentially charging interest on money you should have paid earlier. The IRS typically calculates this penalty automatically and sends you a bill (Form CP2000 notice) if you owe one. However, penalties may be waived under certain circumstances, such as casualty, disaster, or unusual circumstances beyond your control, or if you retired (after age 62) or became disabled during the tax year and the underpayment was due to reasonable cause.
Form 2210 (Underpayment of Estimated Tax by Individuals, Estates, and Trusts) is used to determine if you owe a penalty and calculate the amount. Most taxpayers don't need to file this form because the IRS computes the penalty and bills you. However, you must file Form 2210 if you're using the annualized income installment method to show that you don't owe a penalty, or if you're requesting a waiver of the penalty due to unusual circumstances.
FAQs
Can I increase my withholding from my paycheck instead of making estimated tax payments?
Yes, and this is often simpler than making quarterly estimated payments. If you also receive wages from an employer, you can ask your employer to withhold more tax by filing a new Form W-4 (Employee's Withholding Allowance Certificate) and reducing your allowances or requesting a specific additional amount be withheld each pay period. If you receive a pension or annuity, use Form W-4P to adjust withholding from those payments. For certain government payments, use Form W-4V (Voluntary Withholding Request). Withholding is considered paid evenly throughout the year regardless of when it's actually withheld, which can help you avoid underpayment penalties even if most of your income comes late in the year.
What if I miss a quarterly payment deadline?
You can still make the payment, but you'll likely owe an underpayment penalty for the period between the original due date and when you actually paid. The penalty is calculated based on the federal short-term interest rate plus 3 percentage points and compounds daily. The longer you wait, the larger the penalty grows. If you miss one payment, make sure to pay the next quarter on time and consider increasing it to catch up. You cannot make up for a missed quarter simply by doubling the next payment without penalty—the IRS calculates penalties separately for each period.
Do I need to make estimated tax payments if I'm retired and living on Social Security and investment income?
It depends on your total income and whether you have taxes withheld. Social Security benefits may be partially taxable if your combined income (adjusted gross income plus nontaxable interest plus half of Social Security benefits) exceeds certain thresholds. Investment income from dividends, interest, and capital gains typically has no withholding unless you request it. If your total tax liability will be $1,000 or more after withholding and credits, you'll need to make estimated payments or arrange for voluntary withholding from your Social Security benefits. Many retirees find it simpler to have taxes withheld from Social Security or pension payments rather than making quarterly estimated payments.
How do I handle estimated taxes if I start a business mid-year?
You only need to make estimated payments for the quarters remaining after you start receiving income that's not subject to withholding. If you start your business in July, for example, your first estimated payment would be due September 15 for the period June 1 through August 31, and you'd make subsequent payments in January. Use the annualized income installment method to avoid penalties for not making payments in quarters before your business started. This method, detailed in IRS Publication 505, calculates required payments based on when you actually earned income throughout the year rather than assuming equal quarterly income.
Can married couples file separate estimated tax payment vouchers?
Yes, even if you plan to file a joint return for 2017, you can make separate estimated tax payments. Each spouse should submit their own payment vouchers using their own Social Security numbers. When you file your joint return, you'll combine both spouses' estimated tax payments on your Form 1040. This can be useful if one spouse has more irregular income or if you want to keep payments separate for tracking purposes. However, you cannot make joint estimated tax payments if either spouse is a nonresident alien, you're legally separated, or you have different tax years.
What's the difference between Form 1040-ES and Form 1040X?
These are completely different forms. Form 1040-ES is used to calculate and pay estimated taxes during the current tax year before you file your annual return. Form 1040X (Amended U.S. Individual Income Tax Return) is used after you've filed your annual return to correct errors or make changes to a previously filed return. If you overpaid or underpaid your estimated taxes, you don't amend anything—you simply recalculate your remaining estimated payments using a new Form 1040-ES worksheet. The reconciliation of estimated payments versus actual tax owed happens automatically when you file your annual Form 1040.
Will I automatically receive Form 1040-ES in the mail each year?
Not necessarily. If you made estimated tax payments in the prior year, the IRS may mail you a Form 1040-ES package for the following year, but this isn't guaranteed. The form and instructions are available year-round on IRS.gov where you can download, print, and use them. You can also request forms by calling 1-800-TAX-FORM (1-800-829-3676). Since tax laws and personal circumstances change, it's best to download a fresh copy each year rather than relying on outdated forms from previous years, as rates, deduction amounts, and exemptions frequently change.
This summary is based on authoritative information from IRS.gov, including the 2017 Form 1040-ES instructions and related IRS publications. For complete details and the most current information, visit IRS.gov.
