What is U.S. estimated tax?

What is U.S. estimated tax?

Estimated tax is a method the IRS uses to collect taxes on income that isn’t automatically withheld, such as self-employment income, rental income, or investment gains. U.S. citizens and green card holders abroad may need to make quarterly payments to the IRS using Form 1040-ES.

Who needs to pay estimated tax?

You need to pay U.S. estimated tax if all three of the following apply:

1. You expect to owe at least $1,000 in U.S. tax after subtracting withholding and credits.
2. Your income has little or no U.S. tax withheld.
3. Your withholding is less than:
    - 90% of your current year’s total tax, or
    - 100% of your previous year’s tax (or 110% for high-income taxpayers).

Is it mandatory to pay estimated tax?

Yes. If the conditions above apply to you, estimated tax payments are mandatory. The IRS may charge penalties and interest for underpayment or late payments — even if you pay everything later in the year.

How do I pay estimated tax?

You pay estimated tax by submitting quarterly payments directly to the IRS, usually via Form 1040-ES. Payments can be made online through the IRS website or by mail.

When are estimated tax payments due?

Estimated tax payments are generally due in four quarterly installments:

• Mid-April
• Mid-June
• Mid-September
• Mid-January (of the following year)

Exact dates may vary slightly from year to year. If a due date falls on a weekend or U.S. public holiday, the deadline moves to the next business day.

What forms are used for estimated tax?

• Form 1040-ES: Used to calculate and pay quarterly estimated tax.
• Form 1040: Your annual tax return where estimated payments are reconciled.
• Form 2210: May be used to calculate penalties for underpayment.

Why should I pay estimated tax?

Paying estimated tax helps you:

• Avoid IRS penalties and interest
• Spread your tax burden across the year
• Improve your cash flow management
• Stay compliant and in good standing with the IRS

Can you give examples of who needs to pay estimated tax?

Yes. Here are a few real-world examples:

• Freelancer in the Netherlands: Anna earns $60,000 with no U.S. payroll withholding → must pay estimated tax.
• Landlord in France: John earns rental income from a Paris apartment and expects to owe U.S. tax → must pay.
• Investor in Spain: Maria earns dividends and capital gains without withholding and expects to owe more than $1,000 → must pay.

What happens if I don’t pay estimated tax on time?

If you underpay or miss deadlines, the IRS may charge penalties and interest, even if you settle your tax bill at year-end.

What if I’m unsure about my estimated tax obligations as an expat?

Estimated tax can be complex — especially with foreign income, tax treaties, or self-employment. It’s best to work with a tax advisor who understands U.S. expat tax laws. Americans Overseas connects you with trusted, tax professionals who specialize in U.S. taxation for Americans abroad.

Need more information on your estimated tax obligations?

We, the founders of Americans Overseas, were born in the Netherlands and obtained our American nationality through our (American) mother.

When we heard about the US tax system for the first time around 2013, we were in total disbelief (it can’t be true!), anger (how can they do this?), fear (am I going to get fined or pick up other problems?), and panic (what should I do?). It is (unfortunately) true that there is an additional American tax levy. But there’s no information from the local government, and when approached, the consulate referred us to the IRS, and the IRS was impenetrable.

That’s why we started this initiative to help people from all over the world by providing proper information about the US tax system to avoid unnecessary panic and offering help free of obligation and free of charge. If needed, we have a network of affordable professionals (accountants) who can help you with your estimated tax obligations..

Contact us for more information

Source: Estimated tax IRS