You may have income from which no U.S. income tax is withheld. Or, the amount of tax withheld may not equal the income tax you estimate you will owe at the end of the year. If this is true, and if you have income effectively connected with a trade or business in the United States, you may have to pay estimated tax and file Form 1040-ES(NR). A penalty may be charged if you underpay your estimated tax by a certain amount.

Income effectively connected with a trade or business includes pay received as an employee that is subject to withholding. It does not, however, include pay subject to withholding at a flat 30% rate or lower treaty rate.

Generally, there will be no penalty for the underpayment of estimated tax if the total income tax to be withheld from your 2002 income is at least:

1. 90% of the tax to be shown on your 2002 U.S. income tax return, or
2. 100% of the tax shown on your 2001 income tax return (if your 2001 return covered all 12 months of the year).

Also, you will not have to pay a penalty if the tax due (after subtracting withheld tax) for 2002 is less than $1,000.

If your adjusted gross income for 2001 ( Form 1040NR, line 33) was more than $150,000 ($75,000 if your filing status for 2002 is married filing separately), see Publication 505, Tax Withholding and Estimated Tax.

When to pay estimated tax. Generally, you must make your first payment of estimated tax by the due date for filing the previous year's Form 1040NR or Form 1040NR-EZ.

Additional information. For more information refer to the instructions for Form 1040-ES(NR) and see Estimated Tax Form 1040-ES(NR) in chapter 8 of Publication 519.

Residents of Puerto Rico. If you expect to be a resident of Puerto Rico during the entire year, use Form 1040-ES.

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