Your Ultimate Guide to Vermont Payroll

Employers must navigate various regulations and requirements to ensure proper payroll withholding in each US state. This guide explains what employers must pay and withhold from payroll in Vermont, including unemployment insurance, personal income tax, and workers’ compensation. 

Paying unemployment insurance

On top of withholding federal taxes such as Medicare and Social Security taxes, you are also responsible for withholding and paying certain Vermont state taxes from your employee’s payroll. These taxes together are referred to as employer payroll taxes or payroll withholding. One of the taxes you must pay is unemployment insurance (UI). 

Unemployment insurance is a national program administered by the US Department of Labor and provides temporary payments to people who are unemployed through no fault of their own. You can manage your Vermont unemployment insurance through the online portal. For more information on paying your unemployment insurance, refer to the Vermont Department of Labor. 

In Vermont, the State Unemployment Insurance (SUI) rates are determined by the Vermont Unemployment Compensation Law, which includes five different rate schedules, each containing twenty-one tax rates. These rates vary depending on the schedule currently in effect and the employer's benefit ratio.

• Under Rate Schedule 3, the tax rates range from 0.8% to 6.5%
• New employers are subject to a rate of 1% until they qualify for an experience rate
• Specific industries such as construction have higher rates, with Construction of Buildings at 2.2%, Heavy & Civil Engineering Construction at 3.9%, and Specialty Trade Contractors at 2.8%

Withholding personal income tax from your Vermont employee

Employers are also responsible for withholding personal income tax from their employee’s payroll. Personal income tax, also known as individual income tax or state income tax, is a tax on the income of Vermont residents. The tax is deducted from the employee’s wages and is withheld by the employer.

Vermont's approach to withholding taxes involves a percentage method, which varies based on income brackets and filing status. The tax rates are structured to accommodate different income levels, ensuring a progressive taxation system. For single filers, the rates range from 3.35% to 8.75%, depending on the income bracket. This progressive structure is designed to fairly tax individuals based on their earnings, with higher earners paying a higher rate.

Here is a table that outlines the withholding rates for weekly payrolls:

Submitting payroll taxes in Vermont

After you withhold the tax from your employee, you are responsible for paying the amount you withheld to the state. You can file and pay the withholding amount online. For more information on paying the withholding amount, refer to the Vermont Department of Taxes.

The submission process for payroll taxes in Vermont is streamlined to facilitate easy compliance for employers. Annually, employers must file Form WHT-434, which is the Annual Withholding Reconciliation form. This form, due by January 31 each year, is crucial as it reconciles the amount of Vermont income tax withholding reported during the previous year. For employers who issue 25 or more W-2 and/or 1099 forms, electronic filing is mandatory, promoting efficiency and environmental friendliness.

Payroll tax due dates

For monthly filers in Vermont, keeping track of due dates is essential to avoid penalties. Below is a table that outlines the specific due date for monthly filers:

It's important for employers to note this date and ensure that all filings are completed on time. For those with different filing frequencies, checking the Vermont Department of Taxes website or contacting them directly is recommended for the most accurate and up-to-date information.

Paying your Vermont workers’ compensation

In addition to paying Vermont payroll taxes, employers must also pay for workers’ compensation, even if they only have one Vermont employee. 

Workers’ compensation is a type of insurance that covers wages and medical benefits for employees who are injured while performing their job. The state of Vermont provides information online to help you find a qualified commercial carrier. Employers should verify that their workers’ compensation insurance complies with the state’s regulations for workers’ compensation.

In Vermont, workers' compensation rates are calculated based on the worker's pre-injury average weekly wage. Here's a breakdown of how benefits are determined:

Simplify US payroll tax compliance with Deel

While this guide provides essential information on Vermont payroll taxes, payroll compliance, and state requirements extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel. 

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. Speak with an expert today to see how you can streamline your US payroll processes and ensure compliance with state regulations.