State & Local Tax Impacts of COVID-19 for Vermont – 2021

Thoughtware Alert Published: May 03, 2021 | Updated: Dec 16, 2021

Information current as of November 30, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Vermont

  • Vermont announced the personal income tax filing due date for tax-year 2020 has been extended to May 17, 2021. Accordingly, taxpayers can file their 2020 personal income tax return, and pay any tax owed, by May 17, 2021, without any penalties or interest. However, the Department of Taxes advised that the due date for any tax-year 2021 estimated payments hasn’t been extended; those payments should still be made by April 15, 2021. The recently enacted federal American Rescue Plan Act of 2021 (ARPA) includes a provision for tax-year 2020 excluding the first $10,200 of unemployment benefits received, per individual, as long as the taxpayer had less than $150,000 of income in 2020. However, in order for the Vermont state income tax rules to follow this exclusion, the Vermont Legislature needs to pass a law linking up to the latest federal tax laws. For taxpayers who filed on or after March 15, 2021, and who took the unemployment exclusion on their federal tax return, their Vermont tax forms will automatically include this exclusion. If the Vermont Legislature ultimately doesn’t conform with the new exclusion, the department will issue further guidance to taxpayers who already filed their tax returns. At a minimum, the department would offer a grace period to have corrections made to the taxpayers’ Vermont state income tax returns, without penalties or interest related to this change. The ARPA contains other new tax provisions effective for 2021 and later, which also would require a corresponding change in Vermont law to have the change apply to Vermont state taxes.
    • Vermont Department of Taxes, News Release; March 18, 2021.
  • Vermont legislation updates its IRC conformity date from December 31, 2019, to December 31, 2020, for taxable years beginning on and after January 1, 2020. In addition, Vermont specifically adopted IRC Section 85(c) as amended by the ARPA. Accordingly, Vermont follows the federal provision for tax-year 2020 excluding from income up to $10,200 of unemployment insurance benefits received per individual, as long as the modified adjusted gross income on the tax return is less than $150,000 in 2020. However, all unemployment insurance benefits received during 2020, including the first $10,200 per person, must be included on the Household Income Schedule, HI-144, Line c. For Paycheck Protection Program (PPP) loans forgiven in 2021, Vermont’s IRC conformity law includes a provision making those amounts taxable for tax-year 2021, but business expenses paid using PPP loans will still be deductible in tax-year 2021. 
    • Vermont H.B. 315, effective as noted.
  • Vermont updated its guidance for remote workers. Anyone who is a nonresident but temporarily living and working in Vermont has an obligation to pay Vermont income taxes on the income earned while living and performing work in Vermont. This is true even if the person was in Vermont due to the COVID-19 pandemic and regardless of whether the person’s employer is located inside or outside of Vermont. Individuals are subject to Vermont income tax under two circumstances: they’re residents of Vermont, either by domicile or presence in the state for more than 183 days; or they earn Vermont income. Those persons who have been residing in Vermont for more than two weeks, but generally live and work in another state, are required to pay income tax on the money that’s earned while in Vermont. This applies even if the person is paid by an out-of-state employer. However, for persons who live out of state but previously commuted to Vermont and now live and work outside of Vermont, the income earned while at home isn’t Vermont income (even though the employer is still located in Vermont) and isn’t subject to Vermont income tax. 
    • Vermont Department of Taxes, Filing Guidance for Remote Workers; May 26, 2021.
  • Vermont legislation updates its IRC conformity date from December 31, 2020, to March 31, 2021, for taxable years beginning on and after January 1, 2021. In addition, for PPP loans forgiven in 2021, the legislation repeals a provision that had specifically made those amounts taxable for tax year 2021.
    • Vermont H.B. 436, effective retroactively to January 1, 2021.
  • Vermont announced that Gov. Phil Scott removed all COVID-19 restrictions and ended the state of emergency effective June 15, 2021. Accordingly, the temporary income tax withholding guidance for teleworkers during COVID-19 applies only through June 14, 2021, unless the emergency order is reinstated. Under the COVID-19 guidance now revoked, businesses that had employees working remotely in Vermont on a temporary basis only would not be required to change the employee’s work state to Vermont for state income tax withholding purposes. 
    • Vermont Department of Taxes, COVID Guidance; June 22, 2021.
  • Vermont updated guidance on the corporate income and individual income tax treatment of forgiven PPP loans. The information includes that: 1) the federal Coronavirus Aid, Relief, and Economic Security Act established the PPP to provide loans to businesses to pay certain business expenses; 2) the Consolidated Appropriations Act of 2021 provided that PPP loan recipients may deduct expenses paid for using PPP loan amounts on their federal income taxes, even if the PPP loans are ultimately forgiven; and 3) Vermont is following federal treatment for forgiven PPP loans in tax years 2020 and 2021, which means for both tax years, forgiven loans aren’t taxable in Vermont and ordinarily deductible business expenses paid using forgiven PPP loans are also deductible. 
    • Vermont Department of Taxes, COVID Guidance; November 10, 2021.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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