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 voucher and worksheet package used by nonresident aliens to calculate and pay estimated taxes on income earned in the United States throughout the year. Estimated tax is the method used to pay tax on income that isn't subject to withholding, ensuring you meet your tax obligations as income is earned rather than waiting until the annual return deadline.
This form is specifically designed for nonresident aliens—individuals who don't meet the substantial presence test or green card test for U.S. residency but have U.S.-source income. The package includes an estimated tax worksheet to calculate your expected tax liability, payment vouchers for submitting quarterly payments, and comprehensive instructions for determining whether you need to make these payments.
Estimated tax payments cover not only income tax but also self-employment tax for those running a business, and other taxes that may apply to your situation. The system operates on a pay-as-you-go basis, meaning the IRS expects you to pay taxes on income as you receive it throughout the year, not just when you file your annual return.
When You'd Use Form 1040-ES (NR) (Including Late and Amended Situations)
Basic Filing Thresholds
You must use Form 1040-ES (NR) if both of these conditions apply: First, you expect to owe at least one thousand dollars in tax for the year after subtracting any withholding and refundable credits. Second, you expect your withholding and refundable credits to be less than the smaller of either ninety percent of the current year's tax or one hundred percent of the prior year's tax shown on your return.
Standard Payment Schedule When You Have Wages With Withholding
The payment schedule depends on whether you have wages subject to U.S. income tax withholding. If you do have such wages, you can pay all estimated tax by April 15 or split it into four equal installments due April 15, June 17, September 16, and January 15 of the following year. However, you don't need to make the January 15 payment if you file your annual return by January 31 and pay the full balance due with that return.
Payment Schedule When You Don’t Have Wages With Withholding
If you don't have wages subject to withholding, the schedule differs slightly. You can pay everything by June 17, or pay half by June 17, one-quarter by September 16, and one-quarter by January 15.
Special Rules for Farmers and Fishermen
Special rules apply for farmers and fishermen. If at least two-thirds of your gross income comes from farming or fishing, you can either pay all estimated tax by January 15 or file your annual return by March 2 and pay the total tax due, avoiding estimated tax payments entirely.
Amended Estimated Tax Situations
When you need to amend your estimated tax payments due to significant changes in income, deductions, or credits, you should refigure your total estimated tax using the worksheet. To calculate payments for remaining periods, consult Publication 505's guidance on amended estimated tax under the regular installment method. If a previous payment was less than one-fourth of your amended estimated tax, you might owe a penalty despite making later adjustments.
Key Rules and Requirements for Form 1040-ES (NR)
Safe Harbor and General Rules
The general rule requires that your estimated tax payments, combined with withholding, must equal at least ninety percent of your current year's tax or one hundred percent of your prior year's tax, whichever is smaller. Your prior year return must cover all twelve months to use this safe harbor.
Higher-Income Taxpayer Rules
Higher-income taxpayers face stricter requirements. If your adjusted gross income for the prior year exceeded one hundred fifty thousand dollars (seventy-five thousand if filing as married nonresident alien), you must substitute one hundred ten percent for one hundred percent in the prior-year safe harbor calculation. This rule doesn't apply to farmers and fishermen, who use a sixty-six and two-thirds percent threshold instead of ninety percent.
Restrictions on Joint Estimated Payments
You cannot make joint estimated tax payments with your spouse if either of you is a nonresident alien, if you're separated under a divorce or separate maintenance decree, or if you have different tax years. Each spouse must make separate estimated tax payments based on their individual income and circumstances.
Estates and Trusts
Nonresident alien estates and trusts can also use Form 1040-ES (NR) to figure and pay estimated tax, using the prior year's Form 1040-NR as a guide and potentially consulting Form 1041-ES for additional guidance.
Alternative to Estimated Payments: Increasing Withholding
An alternative to making estimated tax payments involves increasing withholding from your wages. If you receive salaries and wages with withholding, you can file a new Form W-4 with your employer requesting additional withholding to cover tax on other income, potentially eliminating the need for quarterly estimated tax payments entirely.
Step-by-Step Process (High Level)
Step 1: Gather Prior-Year Return and Current-Year Information
Begin by gathering necessary documents including your prior year's tax return and instructions, the estimated tax worksheet, and the tax rate schedules for your filing status. Review any changes noted in the form's ""What's New"" section that might affect your calculations, such as updated standard mileage rates, social security tax wage bases, or adoption credit amounts.
Step 2: Complete the Estimated Tax Worksheet
Complete the estimated tax worksheet by entering your expected adjusted gross income for the year. Calculate your estimated itemized deductions if you plan to itemize, including qualifying home mortgage interest, charitable contributions, state and local taxes up to ten thousand dollars, and medical expenses exceeding ten percent of your income. If eligible, include your qualified business income deduction under section 199A.
Figure your tax using the appropriate tax rate schedule for your filing status. If you have qualified dividends or net capital gains, use the special worksheet in Publication 505 to properly calculate your tax. Add any alternative minimum tax from Form 6251 and other applicable taxes. Subtract your expected credits, but don't include income tax withholding on this line of the worksheet.
Step 3: Add Self-Employment and Other Taxes
Add your self-employment tax if applicable, using the self-employment tax worksheet provided with the form. Include other taxes such as household employment taxes if you'll have federal income tax withheld or would be required to make estimated payments regardless. Add any expected tax on income not effectively connected with a U.S. trade or business, typically taxed at thirty percent or a lower treaty rate.
Step 4: Determine Your Required Annual Payment
Calculate your total estimated tax and determine your required annual payment, which is the smaller of ninety percent of your estimated current year tax or one hundred percent (or one hundred ten percent for higher earners) of your prior year tax. Subtract any income tax expected to be withheld during the year. If the remaining amount is less than one thousand dollars, you're not required to make estimated tax payments.
Step 5: Divide and Schedule Installment Payments
Divide your required payment by four if making quarterly installments with wages subject to withholding, or follow the half-quarter-quarter split if you don't have such wages. Make your payments by the due dates using one of the available payment methods, keeping detailed records of all payments made.
Common Mistakes and How to Avoid Them
Missing or Forgetting Payments
One frequent error is forgetting to make payments altogether. The IRS doesn't send reminder notices for estimated tax payments—you're responsible for tracking due dates and making timely payments. Use the record of estimated tax payments table provided with the form to track payment dates, amounts, and methods. Setting calendar reminders for each quarterly deadline helps ensure you don't miss payments.
Underestimating Income
Underestimating income leads to underpayment penalties. Be conservative when projecting your annual income, especially if your earnings are variable or seasonal. Review your estimate after each quarter and amend your remaining payments if your financial situation changes significantly. It's better to overpay slightly and receive a refund than to underpay and owe penalties plus interest.
Incorrectly Making Joint Payments
Many nonresident aliens incorrectly assume they can file joint estimated tax payments with their spouse. Joint payments are prohibited if either spouse is a nonresident alien, you're separated under a decree of divorce or separate maintenance, or you have different tax years. Each person must file and pay separately.
Misunderstanding Which Income Requires Estimated Tax
Misunderstanding which income requires estimated tax payments causes confusion. Income not subject to withholding includes self-employment earnings, investment income, rental income, prizes, and awards. Even if you have wages with withholding, you may still need to make estimated tax payments if you have substantial other income and insufficient withholding to cover it.
Forgetting Self-Employment Tax
Failing to account for self-employment tax is a costly mistake for self-employed nonresident aliens. Remember to include both income tax and self-employment tax when calculating your estimated tax liability. Use the self-employment tax worksheet provided with Form 1040-ES (NR) to properly calculate this amount, remembering that only 92.35 percent of your net self-employment earnings are subject to self-employment tax.
Ignoring Tax Treaty Benefits
Neglecting to adjust for tax treaty benefits can result in overpayment. If your country has a tax treaty with the United States providing for reduced withholding rates on certain types of income, ensure you apply these rates when calculating your estimated tax on income not effectively connected with a U.S. trade or business.
What Happens After You File
How Payments Are Applied
Once you submit estimated tax payments, the IRS applies them to your account. When you file your annual Form 1040-NR or Form 1040-NR-EZ, you'll report the total estimated tax payments made during the year. These payments are credited against your total tax liability to determine whether you owe additional tax or are due a refund.
Overpayments and Credits to Next Year
If you paid enough estimated tax throughout the year and your total payments equal or exceed your tax liability, you'll receive a refund for the overpayment. You can choose to have this refund sent to you or apply it as a credit toward the next year's estimated tax, effectively giving you a head start on the following year's obligations.
Underpayments and Penalties
When payments are insufficient, you'll owe the balance when filing your return, potentially with an underpayment penalty. The penalty is imposed on each underpayment for the number of days it remains unpaid. The penalty calculation considers whether you paid enough by each quarterly deadline, not just whether you paid enough for the full year. Even if you have an overpayment on your annual return, you might still owe a penalty if you didn't pay sufficient amounts by the quarterly due dates.
Penalty Waivers and IRS Calculation
The penalty may be waived under certain conditions. Situations warranting waiver include casualty, disaster, or other unusual circumstances where imposing the penalty would be inequitable, or if you retired (after reaching age sixty-two) or became disabled during the tax year or the preceding tax year and the underpayment was due to reasonable cause rather than willful neglect.
You can request that the IRS calculate the penalty for you. When filing your annual return, leave the penalty line blank and the IRS will figure the penalty and send you a bill. Alternatively, use Form 2210 to calculate the penalty yourself, which is required if you're using the annualized income installment method to show you don't owe a penalty despite irregular payment amounts.
Late Payments and Postmark Rules
If you make late payments or payments are postmarked after the due date, they're considered late even if you eventually pay the full required amount for the year. The postmark date determines whether a mailed payment is timely—if mailed within the United States and postmarked by the due date, the postmark date is considered the payment date.
FAQs
Can I pay all my estimated tax at once instead of making quarterly payments?
Yes, if you have wages subject to U.S. income tax withholding, you can pay your entire estimated tax by April 15 rather than making four quarterly payments. This option provides flexibility if you prefer to handle your tax obligations once annually rather than tracking multiple deadlines. However, if you don't have wages subject to withholding, your options are different—you can pay all by June 17 or split payments into the half-quarter-quarter schedule starting in June.
What happens if I change my name during the year?
If you changed your name because of marriage, divorce, or another reason and made estimated tax payments using your former name, attach a statement to your annual income tax return. The statement should list all estimated tax payments made, the dates they were paid, the name and identifying number under which you made them. If your identifying number is a Social Security number, report the name change to your local Social Security Administration office before filing your return to prevent processing delays and protect your future benefits.
Do I need to use the payment vouchers, or can I pay electronically?
Electronic payment is strongly encouraged and often more convenient than mailing payment vouchers. You can use IRS Direct Pay for free online transfers from your checking or savings account, pay by debit or credit card through approved service providers (which charge convenience fees), use the Electronic Federal Tax Payment System after enrolling, or make payments through the IRS2Go mobile app. Electronic payments provide immediate confirmation, eliminate concerns about mail delays, and help ensure your payments are credited promptly.
How does income that isn't effectively connected with a U.S. trade or business affect my estimated tax?
Income not effectively connected with a U.S. trade or business is generally subject to withholding at a flat thirty percent rate, or possibly a lower rate if a tax treaty applies between the United States and your country. When calculating your estimated tax, you'll figure the tax on effectively connected income using the regular tax rates and worksheet, then separately calculate the thirty percent tax (or lower treaty rate) on non-effectively connected income. The sum of these amounts represents your total estimated tax before subtracting withholding and credits.
What if my income varies significantly throughout the year?
If you receive income unevenly—for example, from seasonal business operations or a large capital gain late in the year—you may be able to lower or eliminate required payments for some periods using the annualized income installment method. This method allows you to base each quarterly payment on the income actually received through that period rather than assuming income arrives evenly throughout the year. You'll need to use Form 2210 with Schedule AI when filing your annual return to demonstrate that the annualized income installment method justifies your payment pattern.
Am I required to make estimated tax payments if I'm a nonresident alien with only investment income?
It depends on the type of investment income and withholding arrangements. Most types of U.S.-source income paid to foreign persons are subject to thirty percent withholding at the source, which may satisfy your tax obligation. However, if you have effectively connected business income from investments (such as income from trading securities as a business) or insufficient withholding for other reasons, you may need to make estimated tax payments. Calculate your expected tax liability using the worksheet to determine whether you meet the threshold requiring estimated payments.
What should I do if I realize I should have been making estimated tax payments but didn't start on time?
Begin making payments as soon as you realize you should have been paying estimated tax, even if you missed earlier deadlines. While you may owe an underpayment penalty for the periods when you didn't pay, starting immediately minimizes the penalty by reducing the number of days the underpayment remains unpaid. Make remaining payments by their scheduled due dates, and when filing your annual return, you can either have the IRS calculate your penalty or calculate it yourself using Form 2210 to potentially reduce it through the annualized income installment method if applicable.
Note: This summary is based on the 2019 version of Form 1040-ES (NR). Tax laws and forms change periodically. Always verify current requirements and consult the most recent form and instructions at IRS.gov or seek guidance from a qualified tax professional for your specific situation.
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