Completing the updated Vermont version of the Employee’s Withholding Allowance Certificate, the W-4VT, is now more important than ever due to the new federal and Vermont income tax laws. The Vermont Department of Taxes is asking taxpayers to file a new W-4VT to ensure the correct amount of income tax is withheld. For more information, read our press release.
Frequently Asked Questions
Why is it especially important to update my withholding allowances on the new W-4VT in 2019?
In 2017, the federal Tax Cuts and Jobs Act (TCJA) made major reforms to federal tax law, including eliminating personal exemptions, increasing the standard deduction, increasing the Child Tax Credit, and limiting or discontinuing certain deductions. In response to the TCJA, the Vermont legislature proposed a package of tax reforms which was enacted in 2018 as Act 11. Act 11 introduced a Vermont personal exemption and other exemptions, deductions and tax credits to help Vermont taxpayers lower their taxes.
“Because Vermont’s tax calculation has departed further from the federal calculation with the 2018 federal and Vermont reforms, relying on your existing withholding allowances could result in a mismatch between your 2019 withholdings and final liability,” said Tax Commissioner Kaj Samsom. “Simply relying on the federal W-4 allowances for Vermont withholding increases the risk of getting a surprise in the 2020 filing season, which could be a smaller refund, or even an amount due. Updating these forms will help ensure the right amount of Vermont income tax is withheld and taxpayers don’t experience surprises at filing time.”
Completing the W-4VT and submitting it to your employer helps the employer to withhold the correct amount of Vermont income tax from your pay. Commissioner Samsom encourages “all taxpayers to complete the new form and submit it to their employers.”
The Form W-4VT was updated in January of 2019 and even employees who have recently updated their W-4s should make sure that they have completed the most recent version of the W-4VT.
Is the form mandatory?
No, but the Department of Taxes highly recommends that you complete Form W-4VT for these reasons:
- Vermont’s new “Form W-4VT, Employee’s Withholding Allowance Certificate,” was redesigned so that you can keep as much take-home pay as possible without creating an income tax liability due to the State of Vermont when you file your tax return.
- Relying on your existing withholding allowances could result in a mismatch between your 2019 withholdings and Vermont final tax liability. An updated Form W-4VT helps your employer withhold the correct amount of Vermont income tax each pay period.
- If your employer uses the allowances claimed on the federal Form W-4 for Vermont withholding purposes, you may not have enough tax withheld from your paycheck and could find that you must pay more tax than anticipated when you file your return.
Do I need to fill out a new Form W-4VT even if there are no changes to my filing status or my number of withholding allowances?
No. However, Vermont’s Form W-4VT was updated in January 2019, and the Department of Taxes recommends that even if you recently updated your federal Form W-4 and Vermont Form W-4VT, you should check to make sure that you used the most current forms to update withholding.
Why do I need to complete a Vermont W-4VT this year when my federal W-4 was good enough last year?
Because of the new tax laws affecting Vermont individual income tax enacted in 2018, using federal W-4 allowances for Vermont taxes is no longer reliable. An employer may use the information from federal Form W-4 if a Vermont form is not submitted, but there is a possibility that not enough Vermont tax will be withheld. This could result in a tax liability (taxes owed by the employee/taxpayer) when employees file their taxes the following year.
The Department of Taxes strongly recommends that employees complete or update their Form W-4VT.
Where do I find the new Vermont form, and how do I know the right number of allowances to take?
The Form W-4VT, Employee’s Withholding Allowance Certificate walks you through how to determine the number of allowances to take. Having your most recent tax return available will help.
Review the 2020 Income Tax Withholding Instructions, Tables, and Charts for additional guidance and withholding instructions.
Do I send this completed form in with my Vermont income tax returns?
No. Do not send this form to the Vermont Department of Taxes. Give your completed Form W-4VT to your employer or to your employer’s human resources or payroll department/representative.
What does “Exempt” mean?
You may enter “Exempt” on Form W-4VT if you:
- had the right to a full refund of all your taxes withheld in the last tax year because you had no tax liability and
- expect to have no tax liability again for this tax year.
How do I keep more “Take Home Pay” in my paycheck?
Make sure to enter “1” for yourself if no one can claim you as a dependent and enter the number of dependents you will claim on line 3. The more total allowances you have on line 6, the more take home pay you’ll have, but if you over-report allowances you may end up owing taxes when you go to file your income tax return.
How should I fill out the form if my marital status changes during the year?
If your marital status or family situation (for example, adding more dependents) changes during the year, you should consider updating the Vermont Form W-4VT to reflect the family status you will report when you file your taxes. If the change(s) happen(s) earlier in the year, it is more critical to update your withholding allowances when the change occurs.
How do these changes impact people in civil unions and civil marriages?
Employees who are in civil unions or civil marriages may not have the correct Vermont tax withheld unless they complete the new Form W-4VT.
How is Vermont income tax withholding computed?
Vermont Income Tax Withholding is computed using the Vermont withholding tables or wage bracket charts. The filing status, number of withholding allowances, and any extra withholding for each pay period is determined from the employee’s Form W-4VT.
What income is subject to withholding?
Wages, pensions, annuities, and other payments are generally subject to Vermont income tax withholding if the payments are subject to federal tax withholding and the payments are made to:
- a Vermont resident or
- a nonresident of Vermont for services performed in Vermont
Under what circumstances would I file as “Head of Household” on my Form W-4VT?
There is no checkbox on the W-4 to indicate if you are filing as Head of Household (because there are only tables for Married and Single), but head of household filers can add a single withholding allowance on line 4 of the Form W-4VT. The Head of Household filing status is available if you are an unmarried taxpayer who pays over half of the cost of maintaining the home of another qualified individual. Additional information regarding qualified individuals and who may file as Head of Household can be found in IRS Publication 501 (2018), Table 4.