Unfiled Vermont Tax Returns (2010–2024): File Now and Avoid Vermont Department of Taxes Penalties

Thousands of Vermont taxpayers face the challenge of unfiled Vermont tax returns yearly, creating stress and potential financial consequences. According to state data, Vermont collects millions of dollars annually through tax enforcement programs, much of which comes from individuals who failed to file on time. If you have unfiled Vermont tax returns between 2010 and 2024, you are not alone and still have options to fix the situation.

An unfiled return means you did not submit Vermont’s required income tax return (Form IN-111) by the annual deadline, even if you filed your federal income tax return with the IRS. Vermont’s income tax system is separate from the federal system, and residents, part-year residents, and even some nonresidents with Vermont-source income may be required to file. Your filing status, taxable income, and adjusted gross income (AGI) all play a role in determining whether a state return is necessary.

This guide provides a step-by-step overview of what unfiled Vermont tax returns mean for you, the consequences of ignoring them, and the relief programs available to help you get back into compliance. By the end, you will understand how to respond effectively, minimize penalties and interest, and take control of your Vermont tax obligations.

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What Are Unfiled Vermont Tax Returns? 

Understanding what counts as unfiled Vermont tax returns is the first step toward fixing the issue. At its core, an unfiled return means that you did not submit Vermont’s required Form IN-111 by the state deadline. This applies to part-year and nonresidents with Vermont-source income, even if no tax was ultimately owed.

Definition & Filing Requirements

Vermont requires a state income tax return if your adjusted gross income (AGI) or taxable income exceeds the filing threshold for your filing status. These thresholds vary each year and depend on whether you file as single, married filing jointly, or another status. Vermont treats income broadly for tax purposes, including wages, self-employment earnings, investments, and some retirement distributions. Property income, such as rental payments from Vermont real estate, also counts toward income that may require you to file.

Vermont vs. Federal Filing

Filing a federal income tax return does not automatically satisfy Vermont’s requirement. Vermont operates its income tax system with different rules, rates, and credits. This means that even if the IRS has accepted your federal return, you may still need to file a Vermont state return to avoid penalties. Filing can also help you claim Vermont tax credits—such as the state version of the earned income tax credit or property tax credits—which can reduce or even eliminate taxes owed.

Common Triggers for Filing

Several situations create a filing obligation in Vermont:

• If your income exceeds Vermont’s filing threshold, you must file a state return even when no tax is due.
  
  
• You must file a return to report income if you owned property or investments that generated Vermont-source income, such as rental or dividends.
  
  
• If Vermont tax was withheld from your paycheck, you must file to claim a refund or apply credits for taxes already paid.
  
  
• If you qualify for Vermont tax credits or exemptions, filing ensures you can claim benefits like the earned income tax credit or property tax credits.
  
  
• If you are responsible for settling an estate with Vermont obligations, you must file any required estate tax returns to comply with state law.

Even if you believe you are exempt, filing may still be in your best interest to claim credits or refunds you would otherwise lose.

Why Do Taxpayers Fail to File?

Understanding why taxpayers fall behind on Vermont state returns can help you address the problem and prevent it from happening again. Many people with unfiled Vermont tax returns are not trying to avoid taxes—they simply face challenges that delay filing.

Here are some of the most common reasons:

• If you miss filing dates because of significant life events, it is easy for one year of unfiled returns to turn into several. Moving to a new town, changing jobs, or experiencing illness can quickly cause deadlines to slip by.
  
  
• If you miscalculate your taxable or adjusted gross income (AGI), you may mistakenly think you are below the filing threshold and skip filing altogether. This is especially common for part-year residents or those with multiple income sources.
  
  
• If you are caring for elderly relatives or managing family obligations, tax filing can become a lower priority and unintentionally get pushed aside.
  
  
• If you fear you will owe more than you can pay, you might delay filing to avoid seeing the bill. Unfortunately, penalties and interest grow the longer you wait.
  
  
• The situation can escalate if you do not respond to Vermont tax notices, leading to substitute returns or collection actions.

Recognizing these causes can help you take steps to keep your Vermont tax filings up to date before the problem grows.

Consequences of Ignoring Unfiled Vermont Tax Returns

Ignoring unfiled Vermont tax returns can quickly turn a manageable situation into a serious financial problem. The Vermont Department of Taxes has several enforcement tools available, and the longer the returns remain unfiled, the more expensive and stressful the situation becomes.

Penalties and Interest

Vermont imposes multiple penalties and interest charges when returns are late or unpaid.

• Vermont charges a penalty of 5 percent of the unpaid tax for each month the return is late, up to a maximum of 25 percent.
  
  
• A minimum penalty of $50 applies for returns filed more than 60 days after the due date, even when no tax is owed, unless an extension was filed.
  
  
• Individual taxpayers are subject to a 1 percent monthly late payment penalty, while business entities are charged 5 percent monthly.
  
  
• Interest accrues at rates set annually by the Commissioner of Taxes, with rates ranging yearly.

These charges continue to build until the balance is paid in full, which means waiting only increases the total amount owed.

Substitute Returns

Vermont may prepare a substitute return using available tax information when required returns are not filed.

• Substitute returns use the least favorable filing status, such as single or married filing separately, and generally include all reported income without deductions.
  
  
• Beneficial deductions, exemptions, and Vermont tax credits are not applied, resulting in a higher taxable income and tax rate.
  
  
• Refunds are not issued based on substitute returns, so taxpayers must file their return to claim any overpayment.

Collection Actions

Unpaid balances eventually move to collections, and Vermont can take several steps to secure payment.

• Liens may be placed on property, creating a public record and potentially lowering a credit score.
  
  
• A percentage of wages can be garnished from each paycheck until the balance is satisfied.
  
  
• Bank accounts may be frozen or levied to recover unpaid taxes directly from available funds.
  
  
• If notices remain ignored, personal property or other assets can be seized and sold to cover the amount owed.

Collection actions can create lasting financial consequences, so addressing the problem early is the most effective way to prevent disruption.

Relief and Resolution Options 

Vermont provides several ways to resolve unfiled returns and minimize the financial impact. Acting promptly helps stop penalties and interest from accumulating and creates a clear plan to bring your account back into good standing.

1. File Past Returns

Filing past-due Vermont tax returns is the most crucial step toward compliance.

• Start with the oldest unfiled year and work forward chronologically to ensure that carryover deductions and credits are applied correctly.
  
  
• Complete any unfiled federal returns first because Vermont uses federal adjusted gross income (AGI) to calculate state taxable income.
  
  
• Include deductions, exemptions, and Vermont tax credits on each return to reduce your total liability and ensure you claim all benefits.

2. Request a Payment Plan

Taxpayers who cannot pay their balance in full can request an installment agreement from the Vermont Department of Taxes.

• Contact the department and propose a realistic monthly payment amount for your budget.
  
  
• Keep all future returns and payments current to maintain the agreement and avoid default.

3. Ask for Penalty Abatement

Vermont may agree to remove or reduce penalties when there is a reasonable cause for filing late.

• Submit a written explanation describing the circumstances, such as medical emergencies, natural disasters, or reliance on incorrect professional advice.
  
  
• Interest will continue to accrue until the balance is paid, but penalty relief can significantly lower the total amount owed.

4. Explore Vermont Tax Credits and Deductions

Filing your returns ensures you take advantage of all available Vermont tax benefits.

• Vermont’s earned income tax credit and property tax credit can directly reduce the taxes owed.
  
  
• Deductions and exemptions can lower AGI and taxable income, which may decrease your total balance due.

5. Consider Offers in Compromise

Vermont may approve an offer in compromise in limited situations for taxpayers who cannot pay, even with a payment plan.

• Provide complete financial documentation to demonstrate that full payment is not possible.
  
  
• If the offer is accepted, the debt can be settled for a reduced amount, giving you a fresh start.

These steps can help you regain compliance, reduce financial pressure, and prevent collection actions such as liens, garnishments, or bank levies.

How to Respond to Vermont Department of Taxes Notices

Receiving a notice from the Vermont Department of Taxes can feel stressful, but taking quick and organized action can prevent the situation from worsening. Notices often remind taxpayers about unfiled returns, unpaid balances, or missing information. Responding promptly shows that you are willing to cooperate and can help stop additional penalties and interest from accruing.

Follow these steps to address a Vermont tax notice:

1. Read the notice carefully: Confirm which tax year is being referenced, the type of issue identified, and the exact amount the state believes you owe.
   
   
2. Gather your records: Collect your W-2 forms, 1099 forms, and any other relevant documents for the tax year listed on the notice. This will help you prepare an accurate response or return.
   
   
3. File or correct your return: Prepare and submit any missing returns or corrections, ensuring your adjusted gross income, taxable income, and credits are accurately entered.
   
   
4. Provide additional information if requested: When the notice asks for proof of deductions, exemptions, or income reporting, include copies of supporting documents.
   
   
5. Contact the Vermont Department of Taxes: Call or send a secure message through myVTax if you need clarification or additional time to respond.
   
   
6. Request a payment arrangement if needed: If you cannot pay the full amount immediately, arrange an installment plan to avoid further collection actions.

Responding quickly can reduce stress, stop additional fees from being applied, and show the state that you are committed to resolving your tax obligations.

Professional Help and Resources 

Filing several years of unfiled Vermont tax returns can feel overwhelming, especially when records are missing or substitute returns have been filed on your behalf. Working with a qualified tax professional can save time, reduce stress, and help you avoid costly mistakes.

Professional assistance offers several benefits:

• Tax experts prepare accurate returns and ensure deductions, exemptions, and Vermont tax credits are correctly applied.
  
  
• Complex situations such as multiple unfiled years, estate filings, or wage garnishments are handled efficiently.
  
  
• Negotiations with the Vermont Department of Taxes can be managed on your behalf, increasing the likelihood of favorable payment terms.

One of the most valuable steps is gathering your income records. Many taxpayers delay filing because they cannot find old W-2s or 1099s. Our IRS Wage & Income Transcript Service solves this problem by securely retrieving a complete record of every W-2, 1099, and other income form reported to the IRS. This ensures your Vermont returns are accurate and reduces the risk of additional notices.

The Vermont Department of Taxes also provides resources to help you stay compliant:

• myVTax Portal: Access account information and transcripts and make payments online (myvtax.vermont.gov).
  
  
• Forms and Publications: Download current and prior-year tax forms at tax.vermont.gov/forms-and-publications.
  
  
• Phone Support: Call (802) 828-2865 for direct assistance from the department.

The right resources and professional help can put you back on track quickly and confidently.

FAQs 

How many years ago did I need to file unfiled Vermont tax returns?

Vermont generally requires taxpayers to file returns for every year with a filing requirement. There is no statute of limitations on unfiled Vermont tax returns, which means the state can request compliance at any time. Most individuals focus on the most recent six to ten years to get back on track and stop penalties and interest from increasing.

What are the consequences of not filing Vermont state taxes?

The Vermont Department of Taxes applies penalties and interest until the balance is paid. Penalties can reach the highest levels allowed by law, including 25 percent of the unpaid tax. Substitute returns may be filed using the least favorable filing status and without deductions or credits, often resulting in a higher tax rate and more taxes owed than if you filed your own return.

What types of notices can Vermont send about unfiled returns?

The state may send several notices, including filing reminders, balance-due assessments, and collection warnings. Some notices explain missing information or request documentation to support deductions or exemptions. Others escalate to liens or wage garnishments if no response is received. Reading each notice carefully and responding by the deadline is the best way to prevent additional penalties and protect your property.

Will I still get a refund if I file my Vermont tax returns late?

Refunds are available only if you file within three years of the original due date. Returns filed after this period will be processed, but you lose the right to claim overpaid taxes. Filing promptly helps you claim eligible Vermont tax credits, such as the earned income tax credit or property tax credit, which can reduce your balance or increase your refund.

Can Vermont garnish my paycheck or levy my bank account?

Yes, Vermont has the authority to garnish a percentage of wages, levy bank accounts, and place liens on property to collect unpaid taxes. Collection efforts continue until the full balance, including interest, is paid. Responding quickly to notices or setting up a payment plan is the most effective way to stop garnishments and regain control of your finances.

How long does it take to process old Vermont tax returns?

Processing times and the volume of returns the state handles vary by year. Paper returns may take 8 to 16 weeks to process, and complex situations may require more time. Filing electronically, when available, can speed up the process. Being organized and ready with accurate income documents helps avoid additional delays or requests for more information.

Where can I learn more about Vermont tax relief programs?

The Vermont Department of Taxes website provides detailed information about payment plans, penalty abatements, and available credits. Taxpayers can also use the myVTax portal to make payments, view balances, and update account information. Professional tax assistance is recommended for individuals with multiple unfiled years or complex cases to ensure that everything is filed correctly and penalties are minimized.

Take Action Today

Finally, taking the first step is essential to resolving unfiled Vermont tax returns. Every month you wait allows penalties and interest to grow, and substitute returns or collection actions may already be in progress. Filing now can stop additional fees from being applied and help you regain control of your finances.

Our IRS Wage & Income Transcript Service makes the process easier by retrieving every W-2, 1099, and income document reported to the IRS. With these records, you can prepare accurate Vermont tax returns, claim available deductions and credits, and reduce the risk of future notices.

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You do not need to face this process alone. Professional guidance can ensure that all returns are filed correctly and that you take advantage of every credit you qualify for. Act today to get back into compliance, protect your property, and finally put your Vermont tax concerns behind you.