Setting Up Payroll in Vermont: A Quick Guide for Small Business

Navigating payroll setup is a critical step for any small corporation starting operations or hiring employees in Vermont. This guide outlines the essential registration requirements, tax obligations, and compliance steps to ensure your business processes payroll accurately and legally within the state.

Employer Registration Requirements (Federal and Vermont)

Before you can process payroll, several key registrations are required at both the federal and state levels.

Federal EIN (Employer Identification Number)

Your company must obtain a federal Employer Identification Number (EIN) from the IRS. This unique number is necessary for all federal payroll tax filings and deposits. You can apply online via the IRS website for instant issuance or by mail/fax using Form SS-4.

• Online Application: IRS EIN Assistant
• Form SS-4: Downloadable from the IRS website.

Vermont Business Tax Account (Withholding)

Register your business with the Vermont Department of Taxes to get a Vermont Tax Account ID for income tax withholding. This ID, often formatted as “WHT-########”, is needed to file and pay state withholding taxes. New employers typically register online through the myVTax portal by completing the Business Tax Account Registration (Form BR-400 equivalent). Expect to receive your withholding account number within 5-7 business days when registering online.

Vermont Department of Labor Account (Unemployment Insurance)

You must also register separately with the Vermont Department of Labor (DOL) for unemployment insurance (UI). New employers can sign up using the Employer Registration Application on the DOL website. This registration will provide you with a Vermont UI account number (usually 7-8 digits) and your initial unemployment tax rate.

Registering for Vermont Income Tax Withholding

Follow these steps to register for withholding tax with the Vermont Department of Taxes:

1. Create a Vermont Tax Account (Withholding): All employers must register. The quickest method is online via the myVTax portal. Click “Need an Account? Click Here to Register” and follow the instructions for a Withholding Tax Account. Alternatively, use Form BR-400 for mail registration, though this is slower.
2. Receive Vermont Withholding Account ID: After successful online registration, the Department of Taxes will issue your Withholding Account Number (starting with “WHT”) within approximately 5–7 business days. This ID is crucial for tax remittances and filings.
3. Set Up myVTax Access: Ensure you can log in to your myVTax account. This portal is used for filing withholding returns (Forms WHT-436 quarterly and WHT-434 annually), submitting payments, and managing account details. Electronic filing is required for many employers in Vermont (e.g., those submitting 10+ W-2s, using payroll services, or with large tax liabilities), making myVTax access essential.
4. Collect Vermont W-4 (Form W-4VT): Have every employee complete Form W-4VT (Vermont Employee’s Withholding Allowance Certificate) along with the federal Form W-4. This state-specific form determines the correct amount of Vermont income tax to withhold. Keep these forms on file and input the allowance information into your payroll system (like TimeTrex). You can find Form W-4VT on the Department of Taxes website.

Registering for Vermont Unemployment Insurance (UI)

Registering for UI involves these steps with the Vermont Department of Labor:

1. Create a Vermont DOL UI Account: Employers with employees in Vermont must register for UI. For businesses with under 100 employees (and generally up to 250), the Vermont Internet Tax and Wage System on the DOL website is the recommended online method.
2. Provide Business Details: During online registration, you'll submit your EIN, business name, address, and the date you first paid wages in Vermont. Your Employer UI Account Number (typically 7 digits) should be issued immediately online or within a few weeks by mail. You'll also set up credentials to access the DOL Employer Portal.
3. Obtain Your UI Tax Rate: Vermont assigns a State Unemployment Insurance (SUI) contribution rate. For 2025, new employers typically start at 1.0% on the taxable wage base, which is $14,800 per employee for the year. The DOL will send a “Contribution Tax Rate Notice” confirming your rate. Experienced employers' rates can range from 0.4% to 5.4%, based on industry and claims history.
4. Set Up Quarterly Reporting Access: You are required to file quarterly wage reports (Form C-101) electronically via the DOL Employer Portal. Familiarize yourself with this portal and the C-101 filing process, as timely reporting and payment are mandatory.

Vermont Payroll Tax Requirements and Rates (2025)

Once registered, you must manage several federal and Vermont-specific payroll taxes:

Vermont Payroll Tax Summary (2025)

Tax Type	Who Pays	Rate / Base	Key Forms / Notes
State Income Tax Withholding	Employee (Withheld by Employer)	Progressive: 3.35% to 8.75% (based on W-4VT and VT tables)	Remit monthly/quarterly. File WHT-436 quarterly, WHT-434 annually. Use VT Withholding Tables.
State Unemployment Insurance (SUI)	Employer	New employers: 1.0% (typically). Experienced: 0.4% - 5.4%. Wage Base: $14,800 per employee/year.	Report & Pay quarterly via Form C-101 (DOL online portal). Due last day of month after quarter end.
Child Care Contribution (Act 76)	Employer (Min 0.33%) & Employee (Max 0.11%) OR Employer (Full 0.44%)	Total 0.44% of gross wages.	Effective July 1, 2024. Reported/paid with VT withholding tax (on Form WHT-436). Employer chooses split (e.g., 75% employer / 25% employee).
Health Care Fund Contribution (HCFCA)	Employer (Only if no qualifying health plan offered)	Max $268.24 per uncovered FTE per year (~$67.06/quarter). Calculated based on uncovered hours.	Reported quarterly on Form WHT-436. Paid with withholding tax. Check Dept. of Taxes guidance for details.
Federal Income Tax Withholding	Employee (Withheld by Employer)	Based on Federal W-4 and IRS tables.	Deposit monthly/semi-weekly via EFTPS. Report quarterly on Form 941.
FICA (Social Security & Medicare)	Employee (7.65%) & Employer (7.65%)	Soc Sec: 6.2% each up to wage limit. Medicare: 1.45% each (no limit).	Deposit monthly/semi-weekly via EFTPS with Fed Income Tax. Report quarterly on Form 941.
FUTA (Federal Unemployment)	Employer	Generally 0.6% on first $7,000 wages/employee (assumes SUI credit).	Deposit quarterly if liability > $500. Report annually on Form 940.

Workers' Compensation Insurance

While not a tax, Vermont law requires nearly all employers to carry workers' compensation insurance. This is discussed in detail next.

Requirements for Workers’ Compensation Insurance in Vermont

Workers' compensation insurance is mandatory for almost every Vermont employer with one or more employees (part-time or full-time).

• Mandatory Coverage: You must have a policy in force to cover work-related injuries or illnesses for all employees. Vermont's definition of "employee" is broad.
• Obtaining Insurance: Purchase policies from private insurance carriers licensed in Vermont or through the state's assigned risk pool if necessary. Premiums depend on payroll and job risk classifications.
• Officer Exclusion: Corporate officers may be able to opt-out of coverage under specific conditions, but this doesn't remove the requirement to cover other employees. Consult Vermont rules or your insurer.
• Severe Penalties for Non-Compliance: Operating without coverage can lead to fines ($100/day for first 7 days, $150/day after), stop-work orders, and potential criminal charges. Your company would also be liable for all costs if an uncovered employee is injured.
• Proof and Verification: Keep proof of coverage on file. The Vermont DOL provides an online tool to verify employer coverage.

Configuring TimeTrex Payroll Software for Vermont Compliance

Properly configuring TimeTrex is essential for accurate Vermont payroll processing. Here are key setup areas:

• Company Profile: Enter your Federal EIN, Vermont Withholding Account ID (WHT-########), and Vermont UI Account Number in the Company/Organization settings.
• Employee Information: Set work location to Vermont. Input state withholding allowances from each employee's Form W-4VT. Note that Vermont has no reciprocity agreements.
• Federal Tax Configuration: Verify that TimeTrex has current federal tax tables (Income Tax, FICA rates: 6.2% SS / 1.45% Med each, FUTA rate: 0.6% net typically).
• Vermont State Income Tax: Ensure TimeTrex has the correct Vermont withholding tables/formulas loaded. Assign this tax to all applicable employees. You may need to manually configure or update this if not automatically included.
• Vermont SUI Tax: Set up the employer-paid SUI tax. Enter your specific rate (e.g., 1.0% for new employers) and the 2025 wage base ($14,800).
• Child Care Contribution: Check if TimeTrex supports Act 76. If not, manually configure:
  • A 0.11% employee deduction (if splitting).
  • A 0.33% employer contribution (if splitting).
  • (Alternatively, set a 0.44% employer contribution if covering the full amount).
  Verify calculations on a test payroll.
• Health Care Fund Contribution: TimeTrex likely won't calculate this automatically. Use TimeTrex reports (hours/wages for uncovered employees) to calculate the quarterly HCFCA amount manually using the Dept. of Taxes worksheet. Input the total when filing Form WHT-436.
• Paid Leave: Vermont mandates Earned Sick Time (1 hr per 52 hrs worked). Configure TimeTrex's time-off accrual settings accordingly. (Note: As of 2025, there's no state-paid family leave *tax*.)
• Tax Table Updates: Keep TimeTrex software and tax tables updated for the latest rates and regulations.
• Form Generation: Confirm TimeTrex generates accurate W-2s with Vermont state info. Use TimeTrex payroll reports to gather figures for filing quarterly forms (WHT-436, C-101) electronically via state portals (myVTax, DOL Employer Portal).
• New Hire Reporting: This is likely done outside TimeTrex. Use employee data from the system to report new hires to Vermont DOL within 10 days.
• Compliance Checks: Regularly use TimeTrex reports (e.g., tax liability summaries) to verify withholding and contribution accuracy.

Reporting and Recordkeeping Obligations in Vermont

Staying compliant involves regular reporting and diligent recordkeeping:

• New Hire Reporting: Report all new hires to the Vermont DOL within 10 days using Form C-61 or the online portal. Rehires after 60+ days must also be reported.
• Regular Payroll Tax Filings: File Forms WHT-436 (Quarterly Reconciliation) and WHT-434 (Annual Reconciliation with W-2s) with the Dept. of Taxes via myVTax. File Form C-101 (Quarterly UI Report) with the DOL online. Meet all federal filing deadlines (Forms 941, 940, W-2s).
• Recordkeeping:
  • Maintain time and wage records for at least 3 years.
  • Keep payroll tax filings and payment records for at least 4 years.
  • Retain employee W-4, W-4VT, and other withholding forms.
  • Keep workers' comp policy documents and injury logs (OSHA requires 5 years for injury logs).
  • Maintain detailed payroll registers.
• Posters and Notices: Display required Vermont labor law posters (Minimum Wage, UI, Workers' Comp) available from the DOL website.
• Monitor Communications: Keep contact information updated with state agencies and promptly respond to any notices regarding tax rates, filings, or discrepancies.

Key Deadlines and Filing Schedules

Adhering to filing and deposit deadlines is crucial to avoid penalties. Here’s a summary:

Vermont Payroll Filing & Deposit Deadlines

Tax/Filing	Frequency	Due Date
Federal Income/FICA Tax Deposits (IRS)	Monthly or Semi-weekly	Monthly: 15th of next month. Semi-weekly: Wed/Fri per IRS rules.
Form 941 (Federal Quarterly Return)	Quarterly	Apr 30, Jul 31, Oct 31, Jan 31.
Form 940 (FUTA Annual Return)	Annual	January 31 (or Feb 10 if deposits timely).
VT Withholding/Child Care/HCFCA Tax Payments	Monthly or Semi-weekly (mirrors Fed schedule) or Quarterly (if eligible)	Monthly: 25th of next month. Quarterly: With Form WHT-436 (Apr 25, Jul 25, Oct 25, Jan 25). Semi-weekly: Per VT rules.
VT Form WHT-436 (Quarterly Reconciliation)	Quarterly	Apr 25, Jul 25, Oct 25, Jan 25. (Required for all).
VT Form WHT-434 (Annual Reconciliation) & W-2s to State	Annual	January 31. (E-filing required for 10+ W-2s).
W-2 Forms to Employees	Annual	January 31.
File W-2s with SSA	Annual	January 31.
VT Form C-101 (Quarterly UI Report) & Payment	Quarterly	Apr 30, Jul 31, Oct 31, Jan 31. (E-filing usually required).
New Hire Reports (VT DOL)	Per New Hire	Within 10 days of first day of work.
Workers' Comp Policy Renewal	Annual (typically)	Before policy expiration date.

Official Vermont Resources and Forms

Refer to these official resources for detailed guidance and forms:

Key Vermont Payroll Resources

Resource / Form	Agency	Purpose / Link
Withholding Tax Guidance	Dept. of Taxes	tax.vermont.gov/business/withholding
myVTax Portal	Dept. of Taxes	Registration, Filing, Payment: myvtax.vermont.gov
Form W-4VT	Dept. of Taxes	Employee State Withholding: Found on tax.vermont.gov/forms
Forms WHT-436 / WHT-434	Dept. of Taxes	Quarterly/Annual Reconciliation: Found on tax.vermont.gov/forms (filed via myVTax)
Unemployment Insurance (UI) Employer Services	Dept. of Labor (DOL)	Registration, Rates, Filing C-101: labor.vermont.gov (UI section)
Form C-101	Dept. of Labor (DOL)	Quarterly UI Wage Report: Filed electronically via DOL portal.
New Hire Reporting / Form C-61	Dept. of Labor (DOL)	Online reporting or Form C-61: Via labor.vermont.gov
Workers' Compensation Info	Dept. of Labor (DOL)	Requirements & Verification: labor.vermont.gov (Workers' Comp section)
Child Care Contribution Guidance	Dept. of Taxes	Details on Act 76: Search on tax.vermont.gov
Health Care Fund Contribution Guidance	Dept. of Taxes	HCFCA details: Search on tax.vermont.gov

For direct assistance:

• Vermont Department of Taxes (Withholding): (802) 828-6802
• Vermont Department of Labor (Unemployment Insurance): (802) 828-4344

By carefully following these registration, configuration, and compliance steps, small corporations can confidently manage their payroll obligations in Vermont. Remember to consult official state resources and your TimeTrex documentation for the most current information and software-specific instructions.