For people working and earning income for the first time, many may not earn very much during the year or pay much tax. Consequently, they may not meet the requirements to file a federal income tax return.
If you are not required to file a federal return, you are not required to file a Vermont return. If you are required to file a federal return, Vermont also may require you to file a return. Individuals who are not required to file may think it is not worth the trouble to file an income tax return to get a small refund, however, you may be eligible for federal or Vermont tax credits which can only be claimed by filing federal and Vermont returns.
Form W-2
You need Form W-2, Wage and Tax Statement, to complete your federal and state tax forms. Form W-2 contains the wages, tips and other compensation earned from your employer for the tax year as well as how much tax was withheld.
Employers are required to send W-2 forms to their employees by January 31 following the end of the previous tax year, January 1 through December 31. For example, you should receive your Form W-2 for the 2024 tax year by Jan. 31, 2025. If you don’t receive your W-2 by the end of January, ask your employer about it.
The W-2 consists of several copies: a copy for your records and copies to submit with your tax forms. Vermont law requires employers to submit a copy to the Vermont Department of Taxes by January 31 as well, so that the Department can match up the two forms during processing. This helps us identify the taxpayer with certainty and ensure any refunds are sent correctly.
Form 1099
You may also receive some version of federal Form 1099, which shows income earned from a person or business that is not your employer, interest, dividends, rents, royalties, a prize or award, or other forms of income. If taxes were withheld from these sources of income, the 1099 will state that, too. If you receive a Form(s) 1099, you will need it to complete your federal tax return. For more information, read the “Instructions for Recipient” on Form 1099.
Some types of Form 1099 include:
- 1099-G: Statement of a state tax refund from a prior year (does not apply to all refunds), unemployment compensation, taxable grant income. Learn about the Vermont 1099-G.
- 1099-DIV: Statement of dividends from investment accounts
- 1099-INT: Statement of interest from bank accounts
- 1099-K: Statement of income from third-party payment processors, corporate activity, such as income earned from an LLC, or "gig" work (driving for hire, delivering meals, selling crafts, online, etc.)
- 1099-MISC: Statement of income from royalties, rents, prizes, and more.
- 1099-NEC: Non-employee compensation.
You should wait to receive all your 1099s before you file. The most common cause for delayed refunds is from filing returns before receiving all W-2s and/or 1099s.
Forms You May Need
To file your federal taxes, use Form 1040, U.S. Individual Income Tax Return, and supporting schedules if needed. To file your Vermont taxes, use Form IN-111, Vermont Income Tax Return, and supporting schedules if needed. The Department of Taxes recommends e-filing your federal and state taxes using commercial vendor software. The software walks you through the process of completing federal and Vermont returns. Based on your entries, the software may suggest your eligibility for certain tax credits, and it may apply some credits automatically. Because the software does the math for you, there should be fewer errors. Errors on the return may delay processing and any tax refund you are to receive.
You may be eligible to file for free online using a software vendor participating in Free File. To qualify, you must meet the vendor’s requirements. Eligible Vermonters may e-file their federal and Vermont personal income tax returns online free of charge through Free File. Many people working their first jobs and are first-time taxpayers may be eligible for Free File. To make sure you are using the correct Free File portal for both federal and Vermont tax returns, go through the Vermont Department of Taxes Free File webpage and not the IRS website. Read all instructions before reviewing the list of vendors to find the vendor offer(s) that applies to you.
Understanding Your Taxes
As you work through your federal and Vermont income tax returns, you are comparing …
Taxes you’ve already paid: the amount of income taxes that have been withheld each pay period and paid to the federal and state government over the past tax year as shown on your Form W-2 and Form(s) 1099. (Not all 1099s include tax already paid.)
to
Taxes you owe:
- plus, unpaid taxes on any other income you have received
- minus any exemptions, deductions, and credits you are eligible to claim
If you’ve paid too much tax, you are owed a refund. if you did not pay enough tax, you will have to pay the taxes you owe.
Your Refund
If you are expecting a tax refund, the average turnaround time is up to six weeks from the date your return was received. Returns with errors and/or adjustments or returns where additional information has been requested may take longer. You may request your refund be sent through direct deposit to an existing financial account, or by paper check. The Department recommends direct deposit for a shorter turnaround time, but this is not a requirement.
If your direct deposit is rejected by your financial institution, the Department will reissue the refund as a paper check. To protect taxpayers from those who may have had their information compromised, first-time filers may receive their first refund by paper check.