Estimated tax payments

Yes, if you expect to owe at least $1,000 in US tax for the year after subtracting withholding and refundable credits. The US runs a pay-as-you-go system, so tax is due as you earn income, not just when you file. Expats with a US employer usually have tax withheld from their paycheck, but self-employed expats, freelancers, landlords, investors, and people paid by foreign employers usually have no US withholding at all. You don't need estimated payments if your withholding covers at least 90% of this year's tax or 100% of last year's tax. You're also exempt if you owed no US tax for the previous full year and were a US citizen or resident for that whole year. Our guide to Form 1040-ES for US expats explains who falls into each group.

Estimated tax payments are due on April 15, June 15, and September 15 of the tax year, and on January 15 of the following year. If a due date falls on a weekend or legal holiday, it moves to the next business day. Living abroad doesn't change these dates. The automatic two-month extension to June 15 that expats get for filing their return doesn't extend payment deadlines, and interest on unpaid tax still runs from April 15. You can skip the January payment if you file your return and pay the full balance by January 31. The periods aren't equal quarters: the first covers January through March, the second only April and May, the third June through August, and the fourth September through December. Learn how the June 15 deadline for US expats works.

Estimate your total US tax for the year, subtract any withholding and credits, and divide the result by four. The worksheet in Form 1040-ES walks you through it. Start with your expected income in US dollars, converting foreign income at a reasonable exchange rate. Then subtract the Foreign Earned Income Exclusion if you'll claim it, apply your deductions, and add self-employment tax if you work for yourself. Reduce the result by any Foreign Tax Credit you expect for income tax paid abroad. Many expats simply base their payments on last year's return to stay within the safe harbor. If your income arrives unevenly, as it often does for freelancers, the annualized income installment method lets you pay less in quarters when you earn less. See how to calculate estimated tax payments step by step.

The safe harbor rule protects you from an underpayment penalty if you pay enough on time, even if you still owe tax when you file. You're safe if your timely estimated payments and withholding cover at least 90% of the current year's tax or 100% of the previous year's tax. If your adjusted gross income for the previous year was over $150,000 ($75,000 if married filing separately), the prior-year threshold rises to 110%. You're also safe if you owe less than $1,000 after withholding and credits. The prior-year option is the easiest for expats whose income is hard to predict, because last year's tax is already a known number. Each installment must still be paid by its due date, though. A large catch-up payment in January doesn't erase a penalty for earlier quarters. Read more in our expat tax planning tips for estimated payments.

Only if you'll still owe $1,000 or more after the exclusion and credits — and many expats who claim them don't. If the Foreign Earned Income Exclusion or Foreign Tax Credit reduces your US income tax to zero, you have no income tax to prepay. But several taxes are left over. Self-employment tax still applies to excluded income. Investment income such as interest, dividends, and capital gains isn't covered by the exclusion. Wages above the exclusion limit remain taxable, and the 3.8% Net Investment Income Tax generally can't be offset by foreign tax credits. Expats in low-tax countries are the most likely to owe estimated tax, because they have little foreign tax to credit. Taxes you pay abroad don't count as US withholding. Compare the Foreign Tax Credit and the FEIE to see which leaves you owing less.

Yes — you can pay estimated taxes online from anywhere, but most electronic options require a US bank account. IRS Direct Pay and your IRS Online Account let you pay for free straight from a US checking or savings account. The Electronic Federal Tax Payment System (EFTPS) also works with a US account, but you have to enroll first and wait for a PIN to arrive by mail, so set it up well before a deadline. If you only have a foreign bank account, you can pay by debit card, credit card, or digital wallet through an IRS-approved payment processor, which charges a processing fee. Another option is an international wire transfer to the IRS through a bank that supports it. Whichever method you use, select "estimated tax" and the correct tax year. Read our guide on how to pay US taxes online.

If you pay by mail from abroad, send your check and the Form 1040-ES payment voucher to: Internal Revenue Service, P.O. Box 1303, Charlotte, NC 28201-1303, USA. This address applies if you live in a foreign country, use an APO or FPO address, or file Form 2555. Residents of US territories have different rules. Make the check payable to "United States Treasury" in US dollars, drawn on a US bank, and write your name, Social Security number, tax year, and "Form 1040-ES" on it. The IRS occasionally changes its mailing addresses, so confirm the current one in the latest Form 1040-ES instructions before you send anything. International mail is slow, which is why most expats pay electronically instead: an online payment is credited on the date you make it. Check the estimated tax payment due dates so you know when to post your check.

The IRS charges an underpayment penalty, calculated like interest on the amount you should have paid for each quarter. The rate equals the federal short-term rate plus three percentage points and is reset every quarter. The penalty runs separately for each installment, from its due date until you pay or until April 15, whichever comes first. You figure it on Form 2210, or the IRS calculates it and sends you a bill. The penalty is usually much smaller than the penalties for filing late or not paying at all, but it adds up when several quarters are missed. The IRS may waive it if the underpayment was caused by a casualty, disaster, or other unusual circumstance, or if you retired after age 62 or became disabled during the year or the year before, and the underpayment was due to reasonable cause. Learn more about IRS tax penalties.