When you start a new job, your employer will ask you to complete a federal Form W-4, the Employee’s Withholding Allowance Certificate, and a Form W-4VT for Vermont withholding. These forms help your employer calculate how much income tax to withhold and pay from each paycheck. Because the federal and Vermont income tax calculations differ, you should complete the W-4VT so that the right amount of state income tax is withheld.
How much your employer withholds depends on your filing status (for example, single or married) and how many allowances you claim on forms W-4 and W-4VT. The balance between what is withheld and what you owe should ideally be about even. The goal is to either get a small refund or owe very little.
The IRS provides a Withholding Estimator on its website at irs.gov to help you figure out the right amount of federal withholding on Form W-4. The instructions on Vermont’s Form W-4VT will guide you through the process in Vermont. It is important to update your W-4 and W-4VT annually and whenever your filing status or number of allowances change.
Make sure to visit the other sections dealing with taxes: