21 January 2019 Vermont 2019 income tax withholding tables released; 2018 Form W-2 filing reminders The Vermont Department of Taxes released its 2019 state income tax withholding tables and guide. A reproduction of the 2019 annual percentage method withholding tables begins on page 2. (Vermont 2019 income tax withholding instructions, tables, and charts.) Because of the new tax laws affecting Vermont individual income tax enacted in 2018 (see below), the Department strongly recommends that employers require their employees to complete or update Form W-4VT, Vermont Employee's Withholding Allowance Certificate. According to the Department, an employer may continue to use the information from federal Form W-4 if a Vermont Form W-4VT is not submitted, but there is a possibility that not enough tax will be withheld. This could result in a tax liability or tax owed when employees file their tax returns. If the federal Form W-4 indicates an additional amount of federal withholding for each pay period on Line 6, the Vermont withholding should be increased by 30% of the extra federal withholding. As we previously reported, legislation (HB 16, Act 11 of the 2018 special session) reduced Vermont's marginal income tax rates by 0.2% retroactively to January 1, 2018. However, the Department did not issue revised withholding tables for 2018. Employers were instructed to continue to use the 2017 withholding tables. (Email response to inquiry; Vermont income tax guide for tax practitioners.) In addition to the income tax rate reduction, the legislation, which went into effect on July 2, 2018, creates a Vermont personal exemption and standard deduction to replace Vermont's former reliance on federal definitions; increases the earned income tax credit; and creates a state tax credit equal to 5% of the first $20,000 in eligible charitable contributions for all filers (regardless of whether the taxpayer itemizes on their federal tax return) According to the Department, without these reforms, Vermont taxpayers would have seen a $30 million increase in their state income taxes and Vermont's non-profit sector may have seen diminished giving, as fewer Vermonters are expected itemize their taxes under the new federal rules. (EY Payroll NewsFlash, Vol. 19, #141, 8-30-2018.) For 2019, the supplemental rate of income tax withholding increases to 30% of federal income tax withholding (up from 24%). You must withhold Vermont income tax on payments to Vermont residents when federal withholding is required. Vermont withholding is also required where the recipient elects optional federal withholding and does not specifically state that the payment is exempt from Vermont withholding. For periodic payments, the tax is computed using the Vermont wage charts or tables. For non-periodic payments the Vermont withholding can be estimated at 30% of the federal withholding. In all cases, the taxpayer is responsible for ensuring that the correct amount is withheld to avoid underpayment of the Vermont tax liability.
For wages paid on and after January 1, 2019 (married person including civil unions and civil marriages)
Electronic filing of Form WH-434, Annual Withholding Reconciliation and the accompanying Forms W-2/1099 is mandatory for all employers submitting 25 or more Forms W-2 and 1099. Payroll filing services are required to submit all filings electronically. The Department's online filing service, myVTax, can be found here. The 2018 Form W-2 electronic filing specifications can be found here and the Form 1099 specifications can be found here. Note: Forms1099 are required (1) when the payment was subject to Vermont withholding, or (2) when the payment was made to a nonresident of Vermont for services performed in Vermont. Form WH-434 and Forms W-2/1099 for calendar year 2018 are due to the Department by January 31, 2019.
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