Form 1040-ES (NR): U.S. Estimated Tax for Nonresident Alien Individuals (2015)
What Form 1040-ES (NR) Is For
Form 1040-ES (NR) is the package nonresident aliens use to calculate and pay estimated tax throughout the year on income that isn't subject to withholding—or when withholding doesn't cover enough of their tax liability. Think of it as the IRS's "pay-as-you-go" system for people who don't have taxes automatically taken out of every paycheck.
If you're a nonresident alien earning income in the United States that isn't being taxed through regular paycheck withholding, this form helps you figure out how much you should be paying the government in quarterly installments. The package includes worksheets to estimate your annual tax liability, payment vouchers to send with your checks, and a record-keeping table to track what you've paid.
The form covers two types of income: income effectively connected with a U.S. trade or business (which is taxed at graduated rates like U.S. citizens pay) and income not effectively connected with a U.S. trade or business (which is typically taxed at a flat 30% rate, or lower if a tax treaty applies). Common situations requiring estimated tax payments include self-employment income, rental income, investment income not subject to withholding, and situations where you know your withholding won't cover your full tax bill.
When You’d Use Form 1040-ES (NR) (Including Late or Amended Payments)
You must make estimated tax payments for 2015 if both of these conditions apply: you expect to owe at least $1,000 in tax after subtracting withholding and refundable credits, and you expect your withholding and credits to be less than the smaller of either 90% of your 2015 tax or 100% of your 2014 tax (assuming your 2014 return covered all 12 months). Higher-income taxpayers with 2014 adjusted gross income over $150,000 must substitute 110% for that second percentage.
Regular Payment Schedule: If you have wages subject to U.S. withholding, payments are due April 15, June 15, and September 15 of 2015, plus January 15, 2016. You can skip the January payment if you file your 2015 return and pay the full balance by February 1, 2016. If you don't have wages subject to withholding, your first payment is due June 15, 2015, with subsequent payments due September 15, 2015, and January 15, 2016—you can pay the entire amount by June 15 or split it into three installments.
Amending Your Payments: If your income, deductions, or credits change during the year, you can (and should) recalculate your estimated tax. To amend, refigure your total estimated tax using the worksheet, then determine what's due for remaining payment periods. The IRS doesn't send reminders, so you're responsible for tracking due dates. If you realize a previous payment was too low, you may owe a penalty when you file, but adjusting future payments to compensate can minimize additional penalties.
Special Rules: Farmers and fishermen who earn at least two-thirds of their gross income from farming or fishing can pay all estimated tax by January 15, 2016, or file their return by March 1, 2016, and avoid penalties. Fiscal year taxpayers use the 15th day of the 4th, 6th, and 9th months of their fiscal year, plus the 1st month of the following fiscal year.
Key Rules or Details for 2015
The 90/100 Rule
The 90/100 Rule: To avoid penalties, your total withholding and estimated payments must reach at least the smaller of 90% of your current year's tax or 100% of last year's tax (110% if your 2014 adjusted gross income exceeded $150,000). This "safe harbor" rule means you won't be penalized even if you end up owing more, as long as you met this threshold.
No Joint Payments for Nonresidents
No Joint Payments for Nonresidents: Unlike U.S. citizens, you cannot make joint estimated tax payments with your spouse if either of you is a nonresident alien, you're separated under a divorce or separation decree, or you have different tax years. Each spouse must file separately.
Identifying Number Requirements
Identifying Number Requirements: You must provide either your Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), or Employer Identification Number (EIN for estates or trusts) on all payment vouchers. Incorrect or missing numbers can cause processing delays and misdirected payments.
Payment Methods and Addresses
Payment Methods and Addresses: You can pay electronically through Direct Pay, the Electronic Federal Tax Payment System, or by credit/debit card (with convenience fees). If paying by check or money order, mail it with the appropriate payment voucher to the address listed—one address for payments alone, a different address if enclosing other documents. Make checks payable to "United States Treasury" and write your identifying number and "2015 Form 1040-ES (NR)" on the check.
Tax Treaty Considerations
Tax Treaty Considerations: If you're eligible for benefits under a tax treaty between your country and the United States, certain income may be exempt or taxed at reduced rates. However, you must properly claim these benefits by completing the appropriate sections of your annual return and potentially filing Form 8833.
Step-by-Step (High Level)
Step 1: Determine if You Must File
Step 1: Determine if You Must File. Review your expected 2015 income and compare it against your withholding. If you'll owe at least $1,000 after withholding, and your withholding won't cover 90% of your current year's tax or 100% of last year's tax (whichever is smaller), you need to make estimated payments. Exceptions apply for farmers, fishermen, and those with specific income situations.
Step 2: Gather Your Information
Step 2: Gather Your Information. Collect your 2014 tax return (Form 1040NR or 1040NR-EZ) to use as a baseline, the 2015 Tax Rate Schedules for your filing status, and estimates of your 2015 income, deductions, and credits. You'll also need the Self-Employment Tax and Deduction Worksheet if you have self-employment income, since you must account for only 92.35% of net self-employment earnings.
Step 3: Complete the Estimated Tax Worksheet
Step 3: Complete the Estimated Tax Worksheet. Work through the worksheet line by line: estimate your adjusted gross income, subtract itemized deductions and exemptions (the personal exemption amount is $4,000 for 2015, with phaseout thresholds at $154,950 of adjusted gross income), calculate your tax using the rate schedules, add alternative minimum tax and other taxes (like self-employment tax), subtract credits, and add tax on income not effectively connected with a U.S. trade or business. The result is your total estimated tax for 2015.
Step 4: Calculate Required Payments
Step 4: Calculate Required Payments. Determine how much withholding you expect for 2015 and any overpayment from 2014 you're applying. Subtract these from your required annual payment to find what you still need to pay. If the result is less than $1,000, stop—you don't need to make estimated payments. Otherwise, divide the remaining amount by the number of payment periods left in the year.
Step 5: Make Payments on Schedule
Step 5: Make Payments on Schedule. Send each payment by its due date using the payment voucher for that period (vouchers are numbered 1 through 4 with due dates printed on them). Don't staple your check to the voucher, but enclose them together. Keep the Record of Estimated Tax Payments table updated with dates, amounts, and confirmation numbers for your records.
Step 6: Reconcile When Filing Your Annual Return
Step 6: Reconcile When Filing Your Annual Return. When you file Form 1040NR or 1040NR-EZ for 2015 (due April 18, 2016, if you had wages subject to withholding, or June 15, 2016, if you didn't), you'll report your actual tax liability and all payments made—including withholding and estimated tax payments. Any overpayment can be refunded or applied to next year's estimated tax; any underpayment will be due with your return, potentially with penalties and interest.
Common Mistakes and How to Avoid Them
Forgetting to Account for Self-Employment Tax
Forgetting to Account for Self-Employment Tax: Many nonresident aliens with self-employment income calculate only their income tax and forget that they also owe self-employment tax (Social Security and Medicare taxes) on net earnings. Use the Self-Employment Tax and Deduction Worksheet included with the form to properly calculate both the tax owed and the deduction you can take for half of it. For 2015, the Social Security portion applies to the first $118,500 of combined wages and self-employment income.
Using the Wrong Filing Status or Tax Rates
Using the Wrong Filing Status or Tax Rates: Married nonresident aliens cannot file jointly unless both spouses elect to be treated as U.S. residents for tax purposes. If you're married but don't make this election, you must use the "Married filing separately" rate schedule—even if you're living apart from your spouse. Using the wrong rate schedule understates your tax liability and leads to underpayment penalties. Single filers should use Schedule X, while estates and trusts use Schedule W.
Miscalculating the Safe Harbor Amount
Miscalculating the Safe Harbor Amount: Taxpayers often calculate 90% of their estimated current-year tax but forget to check whether 100% of their prior year's tax is smaller (or 110% for higher earners). Always compare both amounts and base your payments on whichever is less—this is your safest path to avoiding penalties. Remember, if your 2014 tax year didn't cover all 12 months, you can't use the prior-year safe harbor method.
Missing the Personal Exemption Phaseout
Missing the Personal Exemption Phaseout: For 2015, the $4,000 personal exemption begins phasing out for taxpayers with adjusted gross income above $154,950. Similarly, itemized deductions may be reduced above this threshold. Failing to use Worksheets 2-5 and 2-6 in IRS Publication 505 when your income exceeds this amount results in overestimating deductions and underestimating tax owed.
Not Adjusting for Tax Treaty Benefits
Not Adjusting for Tax Treaty Benefits: If you're eligible for treaty benefits that reduce or eliminate tax on certain income, don't include that income when calculating estimated tax—but make absolutely sure you properly claim the treaty benefit on your annual return and complete the required documentation. Failing to document treaty claims properly means the IRS may disallow them, leaving you owing tax and penalties on income you thought was exempt.
Sending Payments to the Wrong Address or Without Proper Identification
Sending Payments to the Wrong Address or Without Proper Identification: The IRS has different mailing addresses depending on whether you're including a payment with other documents. Always write your identifying number and "2015 Form 1040-ES (NR)" on your check or money order. Don't send cash, don't staple the payment to the voucher, and verify you're using the correct address: P.O. Box 1300, Charlotte, NC 28201-1300 for payments alone, or Austin, TX 73301-0215 for forms without payments.
What Happens After You File
Immediate Processing
Immediate Processing: The IRS processes your estimated tax payments and credits them to your account under your identifying number. This is why it's critical that your SSN, ITIN, or EIN is correct and matches across all your tax documents. Processing typically takes 2-4 weeks for mailed checks, though electronic payments post within 1-2 business days. You won't receive confirmation from the IRS unless there's a problem, so save your canceled checks or electronic payment confirmations.
Penalty Assessment if Underpaid
Penalty Assessment if Underpaid: When you file your annual return, the IRS calculates whether you paid enough estimated tax throughout the year and whether payments were timely. Penalties apply based on how much you underpaid and for how long. The penalty is calculated for each payment period separately—you can't make up for an underpayment in one quarter by overpaying in another. Penalties may be waived if underpayment was due to casualty, disaster, unusual circumstances, or if you retired after age 62 or became disabled during the tax year and the underpayment was due to reasonable cause.
Refund or Balance Due
Refund or Balance Due: After filing your 2015 Form 1040NR or 1040NR-EZ, you'll either receive a refund if you overpaid (through withholding plus estimated payments) or owe additional tax if you underpaid. You can choose to have any 2015 overpayment applied to your 2016 estimated tax instead of receiving a refund—this election is irrevocable once you make it. If you owe additional tax, payment is due with your return, and interest accrues on any unpaid balance from the original due date.
Records Retention
Records Retention: Keep copies of all payment vouchers, canceled checks or electronic confirmation numbers, and your completed estimated tax worksheet for at least three years (longer if you have certain situations that extend the statute of limitations). These records prove payment if the IRS questions whether you paid estimated taxes or disputes the amounts. The Record of Estimated Tax Payments table in the form package provides a convenient way to track all this information.
Credit Toward Next Year
Credit Toward Next Year: Any overpayment on your 2015 return can be applied toward your 2016 estimated tax. If you make this election on your return, that amount is treated as paid on April 18, 2016 (the 2016 due date), and you can reduce your first 2016 estimated payment accordingly. Remember to track this on your 2016 worksheet to avoid double-counting.
FAQs
What happens if I become a resident alien partway through 2015?
If you become a resident alien during 2015, you're a "dual-status" taxpayer for that year. You generally cannot use Form 1040-ES (NR) for the portion of the year you're a resident—instead, you should use Form 1040-ES (the version for U.S. citizens and residents) for that period. When filing your annual return, you'll typically file Form 1040 with "Dual-Status Return" written across the top and attach a statement showing income for the nonresident portion. Different rules apply depending on whether you were a resident or nonresident on December 31, 2015. This is complex, so review Chapter 1 of IRS Publication 519 for detailed guidance.
Can I make more than four estimated tax payments during the year?
Yes, you can make payments more frequently than quarterly if you prefer. To do this, make copies of unused payment vouchers, fill them in with the payment amount, and mail them with your checks. The IRS doesn't limit how many payments you make, as long as the total amount paid by each quarterly due date meets the minimum required for that period to avoid penalties. Some taxpayers do this when income is sporadic or unpredictable—they pay estimated tax shortly after receiving income rather than waiting for the quarterly deadline.
What if I miss a payment deadline—can I make it up later?
You can send late payments, but penalties will apply for the period between the due date and when you actually paid. The penalty is calculated separately for each payment period based on how much you underpaid and for how many days. Making up the missed payment in a later quarter doesn't eliminate the penalty for the earlier quarter, but it does prevent additional penalties from accumulating. If you miss a deadline, send the payment as soon as possible to minimize the penalty, and consider increasing remaining payments to ensure you meet the annual requirement.
Do estimated tax payments satisfy my obligation if I have tax treaty benefits?
Tax treaty benefits typically apply to specific types of income, reducing or eliminating U.S. tax on those amounts. When calculating estimated tax, exclude income that's treaty-exempt—but you must properly claim the treaty benefit on your annual return, usually by completing Item J of Schedule OI and potentially filing Form 8833. Don't assume treaty benefits apply without verifying the specific treaty provisions. If you don't properly document treaty claims, the IRS may disallow them, meaning you'll owe tax (and potentially penalties) on income you excluded from estimated payments.
How do I avoid penalties if my income varies significantly throughout the year?
The annualized income installment method allows you to base each quarterly payment on your actual income for that period rather than assuming income is earned evenly throughout the year. This is helpful for taxpayers with seasonal businesses, large capital gains late in the year, or other uneven income patterns. You'll need to file Form 2210 (Underpayment of Estimated Tax by Individuals, Estates, and Trusts) with Schedule AI when filing your annual return, even if no penalty is owed, to show you used this method. Details are in Chapter 2 of IRS Publication 505.
What should I do if I realize I've been calculating my estimated tax wrong partway through the year?
Recalculate your total estimated tax liability using current information, then figure what you still need to pay through remaining payment periods. Publication 505 has a worksheet for "amended estimated tax" that walks through this calculation. While you can't go back and fix previous underpayments (penalties may apply for those periods), correcting your calculation for future payments prevents the problem from getting worse. If the error significantly understates your tax, consider making a larger catch-up payment immediately rather than waiting for the next quarterly deadline.
Are there situations where I'm automatically exempt from estimated tax payments?
Certain nonresident aliens don't need to file returns or make estimated payments at all. If your only U.S. trade or business was performing personal services, your wages were less than $4,000, and you have no reason to file for refunds or other purposes, you're not required to file. Similarly, nonresident alien students, teachers, or trainees temporarily present under F, J, M, or Q visas with no income subject to Section 871 taxation don't need to file. However, if you had any income tax withheld, you must file to get a refund. Review the "Who Must File" section in the Form 1040NR-EZ instructions to confirm whether your situation requires filing.
Note: This summary is based on the 2015 version of Form 1040-ES (NR) and instructions. Tax laws change, so always consult the current year's forms and instructions or a tax professional for your specific situation.
