What payroll taxes do small businesses need to pay?

Payroll Taxes for Small Businesses in Vermont

Small businesses operating in Vermont must manage several payroll taxes to stay compliant and ensure smooth operations. Understanding these taxes helps with accurate payroll processing, budgeting, and reporting.

Federal Payroll Taxes

• Social Security Tax: Employers must withhold 6.2% from employees' wages and match this amount.
• Medicare Tax: Employers withhold 1.45% from employees' wages and contribute an equal amount.
• Federal Unemployment Tax (FUTA): Employers pay this tax; it is not withheld from employees. The standard FUTA rate is 6.0% on the first $7,000 of wages per employee, with possible credits reducing the effective rate.
• Federal Income Tax Withholding: Employers withhold based on employee W-4 forms and IRS tables.

Vermont State Payroll Taxes

• Vermont Income Tax Withholding: Employers must withhold state income tax from employee wages according to Vermont withholding tables and remit it regularly to the Vermont Department of Taxes.
• Vermont Unemployment Insurance (UI): Employers contribute to the state UI fund. Rates vary based on experience and industry, applied to the first $17,000 of each employee’s wages as of 2026.
• Paid Family Leave Contributions: As of 2026, Vermont requires employer contributions to the Paid Family Leave program. Check current rates and reporting requirements.

Operational Tips for Managing Payroll Taxes in Vermont

• Register with the Vermont Department of Taxes: Ensure your business is registered for withholding and unemployment insurance accounts before hiring employees.
• Automate Payroll Processing: Use payroll software that integrates federal and Vermont tax calculations to reduce errors and simplify tax filings.
• Maintain Accurate Records: Keep detailed payroll records, including wages, tax withholdings, and tax payments, to comply with state and federal audits.
• Stay Updated on Rates and Laws: Payroll tax rates and requirements can change annually. Review Vermont Department of Taxes updates and federal IRS guidance regularly.
• File Timely Reports: Submit withholding tax returns and unemployment insurance reports on schedule to avoid penalties.