Everything employers need to know about paying Vermont unemployment insurance taxes.
If your small company employs people in Vermont, you must pay the Vermont unemployment insurance (UI) levy. The UI tax pays for unemployment insurance programs for qualifying workers. In Vermont, the state unemployment insurance levy is simply one of numerous taxes that companies must pay. Other major employer taxes not mentioned here include the federal unemployment insurance tax, as well as state and federal withholding taxes.
Varied states have different UI tax policies and rates. Here are the fundamentals of Vermont’s UI tax.
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Become a member of the Department of Labor.
As a Vermont employer, you must open a UI tax account with the Vermont Department of Labor (VDOL). VDOL accepts account registrations both online and on paper. You will be assigned a VDOL employer account number after you have enrolled.
Use the VDOL’s Employer Registration Application to register online. Use Form C-1, Status Report, to register on paper. Blank forms may be downloaded from the VDOL website’s Forms area. There is no cost to register your company with VDOL.
You will need a federal employer identification number to set up your Vermont UI tax account (EIN). You may get an EIN by visiting IRS.gov. In most cases, if you apply online, you will obtain your EIN very instantly.
Unemployment Insurance Tax Liability Regulations
As a for-profit employer in Vermont, you are typically required to pay state unemployment insurance taxes if you fulfill any of the following conditions:
you employ one or more people during some part of a day in at least 20 different weeks (not necessarily consecutive) in either the current or preceding calendar year in general employment you pay at least $1,500 in gross wages during any calendar quarter in either the current or preceding calendar year, regardless of the number of employees you succeed to (take over) the business of another employer already covered by Vermont Unemployment Compensation
The first three things on the list are virtually the same regulations as under FUTA. As a result, if your company is due for federal UI taxes under FUTA, it is also likely to be liable for Vermont UI taxes, and vice versa. Different state and federal restrictions apply to agricultural (farm) workers, domestic (in-home) workers, and employees of certain (but not all) non-profit organizations, which are not included here.
One piece of good news is that state UI tax payments are often deductible from FUTA taxes.
Wage Structure and Tax Rates
Each employee’s salaries are subject to UI tax up to a certain yearly limit. In Vermont, this sum, known as the taxable wage base, has recently increased by around $400 per year. It has lately been nearing $17,000.
Since 2004, the state UI tax rate for most new employers in Vermont, often known as the standard commencing tax rate, has been set at 1%. However, the rate is constantly subject to change. For the first two years of an employer’s existence, the starting rate stays in force. Established employers face a higher tax rate than new ones. A particular established employer’s rate will be determined by a “experience rating.” This refers to how many unemployment benefits have been paid to former workers of the company, among other factors. The greater the tax rate, the more benefit payments provided to former workers (up to a statutory maximum rate).
Submit UI Tax Reports and Payments Quarterly
UI tax reports and payments are required in Vermont on the last day of the month after the end of each calendar quarter.
If the report due date for any calendar quarter occurs on a Saturday, Sunday, or legal holiday, the report and tax payment must be mailed or submitted electronically by the following working day to be deemed timely.
Quarterly reports must be filed online by all Vermont businesses. Large employers are subject to additional filing obligations (more than 250 employees). To file, go to the VDOL’s Employer Online Services website and choose the option to submit quarterly reports. Before you may use the online report filing system, you must first register with the Vermont Internet Tax and Wage System (VITWS). You will essentially be supplying the information requested on Form C-101, Employer’s Quarterly Wage and Contribution Report, when you file. This form’s template is available for download from the VDOL website’s Forms area.
Even if no salaries were received, you must submit quarterly returns. Around 40 days before each due date, you will be reminded of your requirement to file. If you do not file, you will face a penalty.
Make a Public Notice (Poster)
You must display a notification (poster) about state unemployment claims in a visible location for all workers. The poster gives basic information on how to make an unemployment claim and who to contact. You may get a legal notification (Form A-24, Unemployment Insurance Poster) by visiting the Forms area of the VDOL website.
Employees should not be misclassified as independent contractors.
Employers that hire independent contractors rather than employees are exempt from the UI tax. It is critical, however, that you should not misclassify an employee as an independent contractor. If you misclassify an employee, you may face penalties or fines.
Using Payroll Service Providers
You may decide that it is easier to delegate payroll obligations, including UI taxes, to an outside payroll agency. If this is the case, bear in mind that your company, or even you personally, may be held directly liable for errors made by an outside payroll firm.
Further Information
This page simply covers the most fundamental aspects of Vermont UI taxes. Check the IRS and VDOL websites for the most up-to-date information to avoid fines for errors. Employer Information Manual: A Guide to Vermont’s Unemployment Insurance Program is also available through the VDOL. You may get a copy from the VDOL website’s Forms area. Employers must also pay federal unemployment insurance, state and federal withholding taxes, and record new employees, in addition to state unemployment insurance.