Payroll tax in Vermont: What employers need to know [2024]

Navigating payroll taxes can feel daunting for businesses. Not only are there federal laws to consider, but each state also brings its own set of rules and regulations. Vermont, for instance, has unique aspects to its payroll tax structure. It has three state payroll taxes that employers are expected to file routinely, in addition to federal taxes like Medicare and Social Security contributions.

Because regulations vary by state, understanding Vermont's state payroll tax is crucial for staying compliant and avoiding potential penalties. Follow along as we explore the various types of payroll taxes in Vermont, their due dates, submission processes, and other key information employers need to know.

The 3 Vermont payroll taxes

In Vermont, payroll taxes are governed by the Vermont Department of Taxes. Generally, Vermont employers need to be aware of three primary types of state payroll taxes: income tax withholding, unemployment insurance tax, and Vermont Health Care Fund Contributions.

Vermont employers are also required to report new hires to the Vermont Directory of New Hires. This reporting should be done within 10 days of the employee's start date. The information is used for child support enforcement and to detect unemployment insurance fraud.

An employer's payroll tax obligations in Vermont generally start as soon as they begin paying wages to an employee. Let's dive into each tax type, who’s responsible for paying them, and the maximum tax amounts below.

Unemployment insurance tax

Unemployment insurance (UI) tax in Vermont is primarily used for providing temporary income support to employees who lose their jobs through no fault of their own. 

Employers in Vermont need to pay two types of unemployment taxes: state and federal. Employers must pay state tax on the first $13,500 of each employee’s wage during a calendar year.

Here's a breakdown of what employers need to know about the state UI tax:

Employers should stay up to date with the Vermont Department of Labor for the current tax rate applicable to their business. The state recalculates rates annually, so employers need to check regularly for changes that could affect their payroll tax obligations.

Income tax withholding in Vermont

In Vermont, employers must withhold state income tax based on each employee's earnings and the information provided in their Form W-4VT. Because Vermont has a progressive tax system, the amount of taxes employees owe depends on how much they make.

Vermont Health Care Fund Contributions

The Health Care Fund Contributions support the state's healthcare programs. The contribution rate is determined annually, and the maximum contribution amount varies based on the annual rate and taxable wage limit.

Navigating payroll taxes, especially in Vermont with its multiple tax types, can be daunting. Rippling's payroll software simplifies the process for you. Rippling not only automates tax calculations—it also handles tax form submissions and payments for you and keeps track of tax laws at both the federal and state levels, ensuring your business stays compliant. Additionally, Rippling's PEO service can take over the registration and maintenance of your state tax accounts, streamlining your payroll tax process even further.

Payroll tax due dates in Vermont

Knowing when payroll taxes are due in Vermont is crucial for employers to avoid penalties. Here's a breakdown of the typical due dates for the payroll taxes we reviewed above. 

Unemployment insurance tax

Quarterly payments are generally due by the last day of the month following the end of a quarter:

• First Quarter (Jan-Mar): Due by April 30
• Second Quarter (Apr-Jun): Due by July 31
• Third Quarter (Jul-Sep): Due by October 31
• Fourth Quarter (Oct-Dec): Due by January 31

Income tax withholding

In Vermont, the frequency of income tax withholding remittances varies depending on the total tax amount withheld. This frequency usually mirrors your federal withholding tax payment frequency. 

Generally, employers withholding more than a few thousand dollars each month have to remit payments monthly. Smaller businesses with lower tax withholdings usually remit payments on a quarterly basis.

Health Care Fund Contributions

These are typically remitted alongside unemployment insurance tax payments each quarter.

Keep in mind that penalties for any late payroll tax payments may apply. The maximum penalty is 25% of the unpaid amount (plus interest). You should consult with the Vermont Department of Taxes or the Vermont Department of Labor for the most current penalty rates and calculations.

How to submit payroll taxes in Vermont

After understanding the types of taxes and their due dates, Vermont employers need to know how to submit payroll taxes. Vermont offers several methods for submitting taxes, covered below.

Enroll in myVTax

For a streamlined, secure, and efficient way to manage payroll taxes, Vermont's myVTax system is a go-to option. Through myVTax, employers can:

• Make payments
• File and adjust returns
• Manage their tax account
• Report new hires

Instructions for enrolling and managing your payroll tax account are available on the Vermont Department of Taxes website.

Express pay

Express Pay in Vermont allows for quick tax submissions without needing to enroll. Employers can simply enter their tax account number and payment details on the Vermont Department of Taxes website.

File by mail

While electronic filing is encouraged, Vermont also allows employers to submit certain payroll taxes via mail to:

VT Department of Taxes
PO Box 1881
Montpelier, VT 05601-1881

For specific forms and mailing addresses, employers should refer to the Vermont Department of Taxes for the most current information.

Other payment options

In addition to myVTax, express pay, and mail, employers have a few alternatives: 

• Electronic funds transfer (EFT): Employers can opt for EFT payments via ACH debit (usually free of charge) or ACH credit (which might have associated fees).
• Credit card payments: Credit card payments can be made online or via phone.
• Check or money order: For those who prefer traditional methods, checks or money orders are accepted, but it's important to ensure they reach the department before the due date to avoid penalties.

Rippling’s full-service payroll software

For an even more streamlined experience, consider Rippling’s payroll software. Rippling automates compliance tasks and manages all federal and Vermont state payroll tax filings, so you can rest easy knowing your payroll taxes are handled accurately and on time, every time. 

FAQs about Vermont payroll taxes

Are there local tax laws in Vermont?

No. Vermont doesn’t have local income taxes.

Can your tax returns be audited in Vermont?

Yes, tax returns in Vermont can be audited. The Vermont Department of Taxes has the authority to review and audit tax returns to ensure accuracy and compliance with state tax laws.

Are nonprofit organizations subject to payroll taxes in Vermont?

Yes. Nonprofit organizations in Vermont are generally subject to payroll taxes. While they may be exempt from federal income taxes, they typically need to pay state payroll taxes such as unemployment insurance and Vermont Health Care Fund Contributions.

Is there a different tax rate for self-employed individuals in Vermont?

Self-employed individuals in Vermont must pay the same income tax rates as other workers. However, they are also responsible for paying the self-employment tax, which covers the employer and employee portions of FICA taxes.

How does the minimum wage in Vermont affect payroll taxes?

The minimum wage in Vermont influences payroll taxes by affecting the total taxable wages paid to employees. As the minimum wage increases, the total payroll tax liability may also increase, since taxes like FICA and unemployment insurance are calculated based on employee wages.

Are there exemptions for small businesses regarding payroll taxes in Vermont?

While small businesses in Vermont must comply with payroll tax requirements, there may be certain thresholds or conditions that offer some relief or different tax obligations.

How do you calculate net pay from gross pay in Vermont?

To calculate net pay from gross pay in Vermont, you need to deduct all applicable taxes, including federal income tax, FICA taxes, and any state-specific taxes from the employee’s gross wages.

Is workers’ compensation insurance a part of payroll taxes in Vermont?

While not technically a payroll tax, employers in Vermont are required to provide workers' compensation insurance, which is an employment-related cost.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.