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Interest and Penalties

Interest accrues based on the rate set annually by the Commissioner of Taxes see 32 V.S.A.§ 3202.

When Do Interest and Penalties Begin to Accrue?
  • For a failure to pay tax due, interest and penalty accrue from the due date of the tax payment for each month or part of the month that the debt remains unpaid.
  • For a failure to file a return, interest and penalty accrue from the due date of the return for each month or part of the month that the debt remains unpaid.
  • For a failure to pay estimated tax, interest and penalty accrue from the due date of the estimated payment for each month or part of the month that the debt remains unpaid in full.

How Are Penalties Determined?

  • The penalty for failure to pay individual, estate, trust, and  C-Corporation income tax is 1% per month for 2005 through the current tax year.
  • The penalty rate for failure to pay business entity income tax and estimated payments on behalf of nonresidents is 5% per month for 2005 through the current tax year.
  • The penalty for all other tax types is 5% per month.
  • The penalty for failure to file a tax return is 5% per month that the return is not filed.
  • Returns filed more than 60 days after the original due date are assessed a $50 late filing penalty, even if no tax is owed, unless an extension has been filed.
  • The maximum civil penalty is 25% of the unpaid tax due.
  • The penalty for fraudulently or willfully intending to defeat or evade a tax liability is 100% of the unpaid tax.
  • Taxpayers who claim more than the correct amount due to them for the Renter Rebate and Property Tax Adjustment are assessed a one-time penalty of 10%.
     

Please note: that when an extension is filed on time, you will not be penalized during the extension period. However, you must still pay tax due by the original due date. You will be charged interest and penalty if payment is not received on time.

The Department may assess a penalty for failure to file a return in addition to a penalty for failure to pay. However, we will not assess multiple penalties for failing to pay.