Even if this is your first job, you'll either claim a tax refund or pay additional taxes. The following information will help you get started.
Where Your Tax Dollars Go
State governments are funded in part by federal funds, but most of their operating funds come from taxes. The Vermont legislature has the task of raising money, including levying taxes, which results in services being provided for the common good of the people and resources of the state. Learn more about why the state collects taxes and where your tax dollars go.
What Taxes You Will Need to Pay
Personal Income Tax
Paying your income taxes begins with your first paycheck, well before you file your taxes by the April due date each year. Your employer withholds a percentage of federal and state income taxes from every paycheck and pays those taxes to the federal Internal Revenue Service (IRS) and Vermont Department of Taxes. The IRS calls it a “pay-as-you-go tax” where you “pay the tax as you earn or receive income during the year.”
Paying a smaller amount of income tax each pay period instead of the larger total amount in a lump sum when you file your yearly income tax return helps ensure that the correct amount of taxes is paid to federal and state governments in a timely manner. For you the taxpayer, it helps you avoid having to come up with the entire amount due in April. Your employer is required to do this for you, deducting and paying your federal and state governments on your behalf.
Income Tax Withholding
When you begin a new job, your employer will probably ask you to fill out the Employee’s Withholding Allowance Certificate, which is Form W-4 for federal income taxes and Form W-4VT for Vermont income taxes. These forms tell your employer how much to withhold.
Ready to calculate your withholding tax?
If you change your mind later or if your status changes, you may update forms W-4 and W-4VT and resubmit them to your employer. The IRS and Vermont Department of Taxes recommend you review and update forms W-4 and W-4VT at the beginning of each year or whenever your filing status or number of allowances change. Starting a second job or having a new child are common reasons for changing allowances.