Vermont tax payment plan basics

How Vermont payment plans work

There is no fixed dollar limit or set number of months in what Vermont publishes. According to the payment options page, every case is unique, as the Department of Taxes explains. Your situation shapes your plan. To help the Department find one that works, you are asked to reach out.

The collections page adds two rules that are worth knowing. The Department enters reasonable payment plans, under which debts generally are expected to clear fully within one to two years. Your tax type, filing history and payment history also affect the terms.

A financial statement shows the Department what you can afford. Wage earners and self employed people complete Form TAX-693, while businesses complete Form TAX-692. Provide proof of income along with any pensions, child support or alimony. Also include a list of the assets you own.

The payment options page lists the factors that decide your ability to pay:

• How many dependents you support
• The value of any property you own
• The total income of your household each month
• Any assets and debts you have beyond these
• What your household spends each month

Interest and penalties keep growing during payments

When you pay the full amount owed, additional interest and penalties stop accumulating, so send the maximum amount you can now. The Vermont interest rate page sets the 2026 underpayment rate at 7.75% a year. Each year, the Commissioner of Taxes sets a new rate.

Penalties are added too. The interest and penalties page states that failure to pay individual income tax brings a 1% monthly penalty. Most other tax types have a rate of 5% per month. Civil penalties added together stop at 25% of unpaid tax.

What happens if you do nothing in Vermont?

When a bill remains unpaid past its 60-day appeal period, it goes to Collections. If you do not contact the Department, it will assume you can pay. Refunds that Vermont owes you are applied against the debt. The collections page says that these steps can follow:

• Liens can be placed on your property
• Your wages may be garnished, with a share of each paycheck taken for the state
• Bank account levies (cash taken right out of your account)
• Revocation of your business or professional licenses
• The Top 100 Delinquent Taxpayer Report list includes your name and balance.
• Court action or the debt goes to an outside collection agency

Missed payments and outside collection agencies

A missed plan payment is one reason a debt goes to an outside collection agency. The Department then steps back and you work with the agency to resolve it. Vermont also warns about scammers pretending to be collectors. If a demand seems unusual, check with Collections first.

Even when you have a plan, you may receive a certified letter about the Treasury Offset Program. Refunds are redirected through this federal system to pay state debts. Your IRS refund may then be sent to Vermont. This only lowers the debt; it does not end your plan.

Settling a debt for less through an Offer in Compromise

Vermont’s Offer in Compromise program helps when even a long plan cannot clear the debt. Through this program, the final debt is settled for less than the amount owed. The program has three categories. Doubt as to collectability comes first. Doubt about liability is the second one. Economic hardship is the third.

You must already have filed every required return and you must not have received an offer during the past five years. When required by the Department, you must make a good faith payment of at least 5% of the balance. When an amount is accepted, you must pay it within 30 days or spread it over no more than 36 months.

Paying Vermont and the IRS at the same time

Your federal tax remains separate from a Vermont plan. The IRS has its own installment agreements and follows its own rules for them. If you owe both, you have two agreements and two monthly payments to keep current.

Nearby states

• New Hampshire
• Massachusetts
• New York
• All states