Add tax forms, tax rates, and a deposit schedule

Add federal and state filing forms, tax rates, and deposit schedules. This way, we'll calculate the correct taxes for you to report and deposit to the IRS.

What federal tax form should I use?

The IRS uses two forms to report taxes. If you have employees working for you, then file Form 941, Employer’s Quarterly Federal Tax Return, four times per year to report federal withholdings and other payroll taxes from each employee’s paycheck. Use Form 941 unless the IRS told your otherwise.

  • Form 941
  • Form 944

If you are unsure about which deposit schedule you are required to use due to federal changes, you may contact the IRS directly at 1-800-829-4933.

Please be sure to have your Federal Employer Identification Number (FEIN) ready and you're the taxpayer on record or a legal representative for the business. You can also refer to IRS Notice 931 for more information.

IRS Notice 931 (IRS website PDF)

What is my state tax rate?

The state tax rate you'll use depends on where your organization is located. You'll want to check the state agency websites to look into your state income tax, unemployment insurance, and disability insurance.

Use American Payroll Association's guide to figure out your state tax rates.

State, Local & Chapter Links (American Payroll Association website)

Add federal tax form and deposit schedule

  1. Go to Settings, then click General Settings.
  2. Under Features, click Payroll Settings.
  3. Click the Taxes tab.
  4. On the Federal section, under Filing & Deposit Requirements, select:
    • The federal tax return that applies to your organization and the effective date of your organization's deposit schedule.
    • How often your organization makes deposits and the effective date of your organization's deposit schedule.
  5. Under Tax Accounts, select the liability and expense accounts that your organization uses for federal employment and unemployment taxes.
  6. Click Save.

You can edit your federal filing and deposit requirements until you process your first pay run. After that, you'll add a new deposit schedule and effective date if your federal filing requirements change.

California deposit schedules

If you are using a deposit schedule for California, you may be aware that the State of California EDD allows each deposit frequency to make less frequent deposits, and that your California deposit schedule should be based upon your Federal Employment deposit schedule.

Before the beginning of each calendar tax year, you must determine which of the two IRS deposit schedules (Semiweekly or Monthly) you will use. Once your Federal Employment tax deposit is set, there is nothing else you need to do. Xero will automatically update your California deposit schedule to match your Federal schedule.

For more information about this, refer to California deposit requirements (page 6) of the CA Employer's Guide DE44.

California Employer's Guide (Employment Development Department PDF)

If you are unsure about which deposit schedule you are required to use due to federal changes, you should contact the IRS directly at 1-800-829-4933.

Please be sure to have your Federal Employer Identification Number (FEIN) ready and you're the taxpayer on record or a legal representative for the business. You can also refer to IRS Notice 931 for more information.

IRS Notice 931 (IRS website PDF)

Add state and local tax rates

You need to add state tax rates for each state your business is located.

  1. Go to Settings, then click General Settings.

  2. Under Features, click Payroll Settings.

  3. Click the Taxes tab.

  4. To the right of the state's name, click Edit.

  5. Enter your state tax agency account number.

  6. Enter income tax, unemployment insurance, and other details as applicable to the state.

    If you are using percentages in the Unemployment Insurance (UI) field, format your entry as '0.1' rather than '.1'.

  7. If the work location is in a city with local taxes, enter local tax details.

  8. On the Tax Accounts section, select the liability and expense accounts your organization uses for each tax.

  9. Click Save.

You can edit state information as needed.