We know it can be unexpected or worrying, or both, to receive a tax bill. The information below will help you understand why you may have received one, how to read your tax bill, and how to make a payment or find additional resources.
If you are looking for information about your property tax bill, please see Understanding Your Property Tax Bill to learn more.
There are two ways to make a payment:
You can quickly and easily make a payment at any time on myVTax. You do not need to register for a myVTax account to make your payment.
If you prefer to mail your payment, mail your personal check, cashier’s check, or money order payable to the Vermont Department of Taxes and include the payment voucher which can be found at the bottom of your Statement of Account. This will ensure the payment is directed properly to your account.
Mail your voucher and payment to:
Vermont Department of Taxes
PO Box 1779
Montpelier, VT 05601-1779
Penalties and interest are generally assessed:
Underestimated interest and penalty may apply for some taxpayers even if they pay their full tax owed by the original due date. For personal income tax, corporate and business income tax, and fiduciary income tax, tax payments are required to be made throughout the year, not just on the due date for filing a tax return. For most individuals, the payments made throughout the year are handled by withholding from wages in their paychecks. However, some individuals may be required to make additional estimated payments throughout the year. If a taxpayer fails to make these payments on time, they will be assessed underestimated interest and penalty.
Laws outlining the Department’s ability and obligation to assess penalties and interest can be found in 32 V.S.A. § 3202.
There are several types of penalties and interest. Discussed below are the “no fault” penalties and interest that are assessed when tax returns or payments do not arrive on time.
Late Payment Penalty: For personal income tax, corporate income tax, and fiduciary income tax, late payment penalties are assessed at one percent (1%) of the unpaid tax liability for any month or partial month that the tax goes unpaid from the due date. For all other tax types, late payment penalties are assessed at 5% of the unpaid tax liability for any month or partial month that the tax goes unpaid from the due date. Late payment penalty cannot exceed 25% of the unpaid tax liability.
It is important to remember that an extension of time to file the return does not extend the time to pay any tax owed. Paying after the due date will result in assessment of late payment penalties, even if a taxpayer has received an extension of time to file a tax return.
Late Payment Interest: For all tax types, late payment interest will be assessed from the due date until a liability is paid in full, at a rate calculated by law. See 32 V.S.A. § 3108. Interest is calculated based on the daily rate multiplied by the number of days a tax liability is unpaid and the amount of tax owed.
For 2022, the annual interest rate is 3.25%. View current and past interest rates.
Late Filing Penalty: The late filing penalty applies to any taxpayer who fails to file the tax return by the original due date, or a taxpayer who fails to file a tax return by the extended due date if a taxpayer received an extension of time to file. The late filing penalty in Vermont is generally fifty dollars.
Underestimated Interest and Penalty: Estimated payments, for those required to make them, are generally due quarterly and in equal amounts.
For Vermont personal income tax, estimated payments are due April 15th, June 15th, September 15th of the taxable year, and January 15th of the following taxable year. If taxpayers fail to make estimated payments on time, the Department will assess penalties of one percent (1%) of the outstanding liability per month or any partial month that the liability remains unpaid, and interest at the rate calculated by law for the number of days the liability remains unpaid. Underestimated interest and penalty are only assessed up until the due date of the tax return. If any tax liability remains unpaid after the due date, the Department will assess late pay penalty and interest.
A taxpayer files a 2021 tax year return with a total tax liability of $3,542. They have payroll withholding on their W-2s totaling $2,248.00. They owed a total $1,294.00 on their tax return, due April 18, and as of June 1, they have not yet paid. The taxpayer did not have an estimated payment requirement (see example 2 for calculating penalty and interest for underpayment of estimated tax).
On June 1, the taxpayer will be mailed a bill for $1,324.95 which includes the $1,294.00 tax owed, $25.88 of late payment penalty, and $5.07 of late payment interest.
The tax bill is calculated as follows:
TAX |
|
PENALTY |
INTEREST |
|
AMOUNT DUE |
|---|---|---|---|---|---|
| If they owe | They accrue one percent (1%) of the unpaid taxes or $12.94 per month or portion of a month | If their payment is forty-four days (44) late, that will add two months of penalty or (12.94 x 2 = 25.88) | Interest is calculated by multiplying the outstanding tax liability by the number of days late and the daily interest rate. (1294.00 x .00008904 x 44 = 5.07) | = | The combined total of tax, penalty, and interest |
| $1,294.00 | + $25.88 | + $5.07 | = | $1,324.95 |
Do you have questions about a tax bill you may have received from the Vermont Department of Taxes? To learn more about how your tax bill is calculated and to see a list of frequently asked questions, go to tax.vermont.gov/tax-bill
Please note: When calculating interest for debts that cross a calendar year, you may need to account for interest rate changes. In the above example, we calculated the daily interest rate (for debts owed in 2022) at .008904%. View the current and past interest rates.
A taxpayer files a 2021 tax year return with a total tax liability of $963.00. No estimated payments were made during the year and the taxpayer had no payroll withholding. The tax liability of $963.00 is paid when the 2021 tax return is filed by the April filing due date.
The taxpayer’s prior year tax liability was $2,025.00.
The taxpayer is sent a tax bill for $90.87, which includes $69.44 of penalty and $21.43 of interest for failure to make adequate estimated payments during the tax year.
Because 90% of the taxpayer’s current year tax liability ($867.00) is less than 100% of their prior year tax liability ($2,025.00), they needed to have paid at least $216.75 (867/4) on each quarterly due date throughout the year. Since they made no payments until the April filing due date, penalty and interest is assessed.
The penalty is calculated as 1% of the unpaid liability per month or portion of a month and interest is calculated at the statutory rate for any unpaid liability.
The tax bill is calculated as follows:
| PERIOD | TAX | PENALTY | INTEREST | AMOUNT DUE | ||
|---|---|---|---|---|---|---|
| Quarter due date | If they owe | They accrue one percent (1%) of the unpaid tax per month or portion of a month ($2.17 per month) | Total penalty per quarter ($2.17 x number of months = penalty) | And accrue daily interest which is the number of days late multiplied by the daily interest rate or (amount of tax owed x 010959% x number of days late until next quarter = interest) | = | The combined total of tax, penalty, and interest |
| 04/15/2021 | $216.75 | Twelve months of penalty applied between April 15 of the current tax year until April 15 of the subsequent tax year. |
+ $26.04 How to calculate: (2.17 x 12=26.04) |
+ $1.45 How to calculate: 216.75 x .00010959 x 61 = 1.45 |
= | $27.49 |
| 06/15/2021 | $216.75 | Ten months of penalty applied between June 15 of the current tax year until April 15 of the subsequent tax year. |
+ $21.70 How to calculate: (2.17 x 10 = 21.70) |
+ $4.37 How to calculate: 433.50 x .00010959 x 92 = 4.37 Total amount of tax owed: $433.50 (combined Q1 and Q2 liabilities with no payments) |
= | $26.07 |
| 09/15/2021 | $216.75 | Seven months of penalty applied between September 15 of the current tax year until April 15 of the subsequent tax year |
+ $15.19 How to calculate: (2.17 x 7=15.19) |
+ $8.66 How to calculate: 650.25 x .00010959 x 107 = 7.62 Now add: Daily interest rate change (for debts owed in 2022 at .0000890)multiplied by number of days late until Q4 due date (January 18 due to weekend): 650.25 x.00008904 x 18 = 1.04 |
= | $22.81 |
| 01/15/2022 | $216.75 | Three months of penalty applied between January 15 of the subsequent tax year until April 15 of the subsequent tax year |
+ $6.51 How to calculate: (2.17 x 3=6.51) |
+ $6.95 How to calculate: 867 x .00008904 x 90 = 6.95 Total amount of tax owed: $867 (combined Q1, Q2, Q3, and Q4 liabilities with no payments) |
= | $13.46 |
| TOTAL | ||||||
| $90.87 |
You can appeal a Department assessment within sixty days of the mailing date of the first Notice of Assessment (NOA). The appeal process is your opportunity to contest the reason for the assessment or the calculation, and to provide information to support your reasons. If you wish to speak with the Department before filing an appeal, please refer to the phone number and email address found at the bottom of your NOA. If you don't contest the assessment and only wish to request an abatement of penalty or interest due to reasonable cause or hardship, or to request a payment plan, you may do that without filing an appeal. Please contact the Department at the email address or telephone number on your NOA.
You can appeal your bill at any time on myVTax. You do not need to register for an account to file an appeal.
If you wish to mail your appeal, you should include the Taxpayer Appeal Form (TAX-610) that came with your NOA and include supporting documentation that outlines why you are appealing.
If you file an appeal, the Department will work with you to resolve any issues you may have, and if we cannot resolve all issues, will schedule a formal hearing at the Department where you may present your case to the Commissioner through the Department Hearing Officer. To learn more about the appeal process please see How to File an Appeal.
Yes, you can pay your bill or enter a payment plan while appealing a bill. Making a payment or entering a payment plan is not an admission that you owe the debt. Many taxpayers make payments or enter a payment plan during appeal to minimize assessment of penalty and interest if the outcome of their appeal does not reduce their assessment. If a tax liability is reduced in an appeal and a payment has been made, any overpayments will be refunded.
Generally, taxpayers who filed and paid their taxes on time but still receive a bill either had an adjustment to their tax return and tax liability or are subject to underestimated interest and penalties.
For adjusted tax returns, the Department will send you an adjustment or “recomp” notice that outlines the changes made to your return. Frequently, this adjustment notice will accompany the bill that a taxpayer receives, but it may be mailed separately.
Underestimated interest and penalty may apply for some taxpayers even if they pay their full tax owed by the original due date. For personal income tax, corporate and business income tax, and fiduciary income tax, tax payments are required to be made throughout the year, not just on the due date for filing a tax return. For most individuals, the payments made throughout the year are handled by withholding from wages in their paychecks. However, some individuals may be required to make additional estimated payments throughout the year. If a taxpayer fails to make these payments on time, they will be assessed underestimated interest and penalty.
An extension only extends the time to file a return, not to pay the tax. If you paid your tax liability on the extended due date, you may receive a tax bill for late payment penalty and interest.
If you are unable to pay the full balance due, you can request a payment plan. There are two ways to set up a payment plan:
You can set up a payment plan at any time on myVTax. You do not need to register for a myVTax account to set up your payment plan.
If you prefer to speak to somebody over the phone to set up a payment plan, please contact our Compliance Division at (802) 828-2518 to speak with an agent.
The Department does everything it can to issue tax assessments in a timely manner. In many cases, the Department has information during its initial review of a taxpayer’s return that leads to an assessment. However, the Department may receive information from the Internal Revenue Service, other state agencies, or other sources that lead to an adjustment to a tax return and an assessment on prior tax period. The Department generally has three years to issue an assessment from the date a tax is required to be paid, or from the date a taxpayer files their tax return, whichever is later. See 32 V.S.A. § 5882. This time limitation does not apply in situations where a taxpayer has not filed a tax return.
We are here to answer any questions you have about your tax bill. Please refer to the bottom of your Notice of Assessment (NOA) for the correct contact information so that we may assist you with questions you may have. All Notices of Assessment include the appropriate contact information depending on what tax type you owe for, and how old the debt is. If you only received a Statement of Account or do not have your NOA, please contact the Compliance Division at (802) 828-2518 for assistance.
For our staff to best assist you, please review the letters received and details of your tax return. If you believe you made payments that the Department is not crediting you for, please have the dates, amounts, and method of payment available when calling.
