First job, first-time taxpayer. Whether you’ve just accepted your first job and need to pay taxes or claim a refund, here is some important information to help you get started.
Where your tax dollars go
State governments are funded in part by federal monies, but most of their operating monies 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 do I need to pay?
Personal Income Tax
Paying your income taxes begins 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.”
Why would you pay 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? For federal and state governments, it helps ensure that the correct amount of taxes is paid. For taxpayers,it helps you save up to pay your taxes over the entire year and avoids you 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. You may find it helpful to learn about these forms and how to fill them out before your first day on the job.
If you change your mind later or if your status changes, you may update forms W-4 and W-4VT and submit them again 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.