Form 1040-ES (NR): U.S. Estimated Tax for Nonresident Alien Individuals
What Form 1040-ES (NR) Is For
Form 1040-ES (NR) is the payment package nonresident aliens use to calculate and pay estimated taxes on income that isn't subject to withholding throughout the year. If you're a nonresident alien earning money in the United States that doesn't have taxes automatically taken out—such as self-employment income, rental income, capital gains, or other income effectively connected with a U.S. trade or business—this form helps you figure out how much you should pay to the IRS quarterly to avoid penalties.
The form isn't actually filed with the IRS in the traditional sense. Instead, it's a worksheet and voucher system. You use the worksheet to calculate your estimated tax liability for the year, then divide that amount into quarterly payments. Each payment is sent to the IRS with a payment voucher or through electronic payment methods. Think of it as a way to pay your taxes as you earn income, rather than facing a large bill when you file your annual return on Form 1040-NR.
The 2018 version of this form reflected significant tax law changes from the Tax Cuts and Jobs Act, including new tax rates ranging from 10% to 37%, elimination of personal exemption deductions, an increased child tax credit up to $2,000, and changes to itemized deductions including a $10,000 cap on state and local taxes.
When You'd Use Form 1040-ES (NR) (Late/Amended Filing)
You must use Form 1040-ES (NR) during the 2018 tax year if you expect to owe at least $1,000 in tax after subtracting your withholding and refundable credits, AND you expect your withholding and credits to be less than the smaller of either 90% of your 2018 tax or 100% of your 2017 tax. However, if your 2017 adjusted gross income exceeded $150,000 (or $75,000 if married filing separately), you need to meet 110% of your 2017 tax instead of 100%.
For the 2018 tax year, if you had wages subject to U.S. income tax withholding, your payment due dates were April 17, June 15, and September 17 of 2018, plus January 15, 2019. You could skip the January payment if you filed your 2018 Form 1040-NR by January 31, 2019, and paid your entire balance due. If you didn't have wages subject to withholding, you could make your first payment by June 15, 2018, then follow a three-installment schedule.
If you need to amend or correct your estimated tax payments during the year because your income changed significantly, you should refigure your total estimated tax using the worksheet and adjust your remaining payments accordingly. The IRS doesn't send reminders for these payments—you're responsible for making each payment by the due date. If you discover late in the year that your income was higher than expected, you can reduce penalties by using the annualized income installment method, which accounts for uneven income throughout the year.
Special timing rules apply to farmers and fishermen. If at least two-thirds of your gross income comes from farming or fishing, you can either pay all your estimated tax by January 15, 2019, or file your 2018 Form 1040-NR by March 1, 2019, and pay the total tax due without making any estimated payments during the year.
Key Rules or Details for 2018
The fundamental rule is that estimated tax applies only to income effectively connected with a U.S. trade or business, plus certain other U.S. source income. For income not effectively connected with a U.S. trade or business, you typically multiply that income by 30% (or a lower treaty rate if applicable) to determine the tax owed, and this amount gets added to your total estimated tax calculation.
You cannot make joint estimated tax payments if you or your spouse is a nonresident alien, even if you're married. Each nonresident alien must file separately, using filing status categories of single or married filing separately. The social security tax maximum for 2018 was $128,400 of earned income, and if you're self-employed, you must account for self-employment tax using only 92.35% of your net profit from self-employment.
When calculating estimated tax, you must consider all applicable credits but cannot include personal exemption deductions, which were suspended for 2018. Your child must have a Social Security Number (not just an ITIN) issued before your 2018 return's due date to qualify for the child tax credit. If your dependent has only an ITIN, you might qualify for the new $500 credit for other dependents instead.
Penalties for underpayment apply even if you're owed a refund when you file your annual return. The penalty is calculated on each underpayment for the number of days it remains unpaid. However, the penalty may be waived under certain circumstances, such as casualty, disaster, or unusual circumstances, or if you retired or became disabled during the tax year and the underpayment was due to reasonable cause.
For withholding from wages, you can potentially avoid making estimated tax payments altogether by asking your employer to withhold more tax by filing a new Form W-4. This strategy works particularly well if you have other income sources but receive regular wages subject to withholding.
Step-by-Step (High Level)
Start by gathering your financial records to estimate your 2018 adjusted gross income. Use your 2017 tax return as a guide, but adjust for any expected changes in income, considering the new 2018 tax rates and rules. Calculate your expected income from all sources—wages, self-employment, rental properties, capital gains, and other income effectively connected with a U.S. trade or business.
Next, estimate your itemized deductions or determine if you'll use the standard deduction (though most nonresident aliens cannot claim the standard deduction). For 2018, itemized deductions changed significantly: medical expenses must exceed 7.5% of AGI to be deductible, state and local taxes are capped at $10,000, home mortgage interest rules changed, and many miscellaneous deductions subject to the 2% AGI floor were eliminated. If you qualify for the new Section 199A deduction (up to 20% of qualified business income), calculate that amount as well.
Calculate your expected tax liability using the 2018 Tax Rate Schedules provided with the form. These schedules differ based on your filing status. If you have qualified dividends or capital gains, you may need to use special worksheets to properly calculate the tax at preferential rates. Add any alternative minimum tax from Form 6251 if applicable.
Subtract your expected credits (but not income tax withholding at this stage) and add other taxes like self-employment tax. For self-employment tax, multiply your expected net self-employment income by 92.35%, then apply the appropriate rates: 12.4% for Social Security tax (up to the $128,400 maximum) plus 2.9% for Medicare tax. Remember to deduct 50% of your self-employment tax when figuring your AGI.
Calculate your total estimated tax and compare it to your required annual payment. You must prepay the smaller of 90% of your 2018 tax or 100% of your 2017 tax (110% if your 2017 AGI exceeded $150,000). Subtract any income tax withholding and determine if you owe at least $1,000—if not, you're not required to make estimated payments.
Divide your required payment by four (or three, depending on your payment schedule) and make payments by the due dates using payment vouchers or electronic payment methods. Keep detailed records using the Record of Estimated Tax Payments table to track all payments made throughout the year.
Common Mistakes and How to Avoid Them
One of the most frequent errors is forgetting that nonresident aliens cannot file joint estimated tax payments even if married to a U.S. citizen or resident. Always file separately and use the appropriate filing status. Many taxpayers also mistakenly believe that having withholding from wages means they don't need to make estimated payments, but withholding and estimated tax work together—if your withholding doesn't cover at least the required percentage of your total tax liability, you still need estimated payments.
Another common mistake involves calculating self-employment tax incorrectly. Remember to use only 92.35% of your net self-employment income, not the full amount, and don't forget to account for the deduction of half your self-employment tax when calculating your AGI. Some taxpayers also overlook the Social Security tax maximum of $128,400, which means income subject to Social Security tax above that threshold only has the Medicare portion of self-employment tax applied.
Many nonresident aliens fail to distinguish between income effectively connected with a U.S. trade or business (taxed at graduated rates) and income not effectively connected (typically taxed at a flat 30% or treaty rate). This distinction is crucial for proper tax calculation. Also, remember that U.S. tax treaties may reduce your withholding rate on certain types of income—review Publication 519 to determine if a treaty applies to your situation.
Taxpayers often miss payment deadlines because they don't realize the IRS doesn't send reminder notices. Mark your calendar with the quarterly due dates and set reminders well in advance. If you make payments late, penalties accrue daily on the underpayment, so even a few days can matter. Consider setting up electronic payments through EFTPS (Electronic Federal Tax Payment System), which provides confirmation and helps ensure timely payments.
Don't confuse the payment voucher's "amount you're sending" box with your total estimated tax. That box should only show the actual check or money order amount for that specific quarter, not any overpayment credit you're applying from the prior year. Write "2018 Form 1040-ES (NR)" and your identifying number on your check to ensure proper credit.
Finally, avoid the mistake of not adjusting your estimated payments when your financial situation changes significantly during the year. If you receive a large capital gain, start a business, or lose income, recalculate your estimated tax obligation and adjust remaining payments. Using the annualized income method can help avoid penalties when income arrives unevenly throughout the year.
What Happens After You File
After making your estimated tax payments, the IRS credits these amounts to your account under your Social Security Number, Individual Taxpayer Identification Number (ITIN), or Employer Identification Number (EIN). You can verify your payments by accessing your online account at IRS.gov, where you can view amounts owed and review up to 18 months of payment history.
When you file your annual Form 1040-NR for 2018 (typically due June 15, 2019, for nonresident aliens with no U.S. wages, or April 15, 2019, for those with wages subject to withholding), you'll report your total estimated tax payments made throughout the year. These payments get credited against your total tax liability. If you paid more than you owed, you'll receive a refund or can choose to apply the overpayment to your 2019 estimated tax. If you underpaid, you'll owe the balance plus potential penalties and interest.
The IRS will calculate whether you owe an underpayment penalty when processing your return. If you meet certain exceptions—such as your prior year tax was zero, you had no tax liability, or circumstances beyond your control caused the underpayment—the penalty may be waived. However, the penalty for underpayment of estimated tax generally cannot be waived for reasonable cause alone; specific statutory exceptions must apply.
If you owe an underpayment penalty, you can either let the IRS calculate it and send you a bill, or you can calculate it yourself using Form 2210 (Underpayment of Estimated Tax by Individuals, Estates, and Trusts) and include it with your return. Filing Form 2210 is required if you use the annualized income installment method to show that you don't owe a penalty despite seemingly late or insufficient payments.
For taxpayers who cannot pay their full tax liability when filing their return, the IRS offers payment plans and installment agreements available online at IRS.gov. These arrangements allow you to pay over time, though interest and penalties continue to accrue until the balance is paid in full.
FAQs
Do I need to make estimated tax payments if I'm a nonresident alien student with only scholarship income?
It depends on whether your scholarship is taxable. If the scholarship covers only tuition and course-related expenses, it's generally not taxable. However, amounts used for room, board, or other living expenses are taxable income. If you expect to owe at least $1,000 in tax on this income and don't have sufficient withholding, you need to make estimated payments. Many students are exempt from estimated tax requirements under certain circumstances, so review Publication 519 and Publication 970 carefully.
Can I pay all my estimated tax at once instead of making quarterly payments?
Yes, you can pay your entire estimated tax liability with your first payment if you prefer. However, if you end up owing more than expected and haven't made sufficient payments by each quarterly due date, you might face underpayment penalties calculated on a quarterly basis. Paying the full amount early protects you from penalties on all four quarters. If you have wages subject to withholding, you could make one payment by April 17; if not, by June 15.
What if I become a resident alien partway through the year?
Your tax status change from nonresident to resident alien creates a dual-status year, which significantly complicates your tax situation. You generally cannot make joint estimated payments in a dual-status year. You'll need to file Form 1040 for the resident portion and Form 1040-NR for the nonresident portion, or possibly make a first-year choice to be treated as a resident for the entire year. Consult Publication 519 for detailed guidance, as estimated tax rules become complex in dual-status situations.
I missed a quarterly payment deadline—what should I do now?
Make the missed payment as soon as possible to minimize penalties and interest. Penalties accrue daily on underpayments, so every day matters. Continue making your remaining scheduled payments on time. When you file your annual return, the IRS will calculate the penalty based on when payments were actually made versus when they were due. You might also consider increasing your withholding from wages if possible to make up the shortfall.
Can I use a tax treaty to reduce my estimated tax payments?
Yes, if your home country has a tax treaty with the United States that provides for reduced rates on specific types of income, you can apply these rates when calculating estimated tax. For example, many treaties reduce the withholding rate on certain dividends, interest, or royalties below the standard 30% rate. Review your specific treaty provisions in Publication 901 and ensure you've properly notified payers by filing the appropriate forms (typically Form W-8BEN) to claim treaty benefits.
How do I handle state estimated taxes as a nonresident alien?
Form 1040-ES (NR) only covers federal estimated tax payments. Many states require separate estimated tax payments for income earned within their borders. Each state has its own rules for nonresident taxation and estimated payments. Contact the tax authority in each state where you earned income to determine your obligations. Don't assume that paying federal estimated tax covers your state requirements.
What payment method is best for estimated taxes?
Electronic payment methods offer significant advantages: instant confirmation, no risk of lost mail, ability to schedule payments in advance, and automatic record-keeping. The IRS Direct Pay system is free and transfers money directly from your bank account. EFTPS (Electronic Federal Tax Payment System) also works well, especially for people making regular payments, though enrollment is required in advance. Mobile apps like IRS2Go provide convenient access. If you prefer paying by check, allow sufficient mailing time and always use the correct voucher for each quarter to ensure proper crediting.
Sources: All information in this summary comes from authoritative IRS sources, including the 2018 Form 1040-ES (NR), IRS estimated tax guidance, and Form 1040-ES (NR) information page.
