Correct a tax payment

Fix a tax payment by reverting a manual payment, canceling an electronic payment that hasn't been processed, or by making an unscheduled pay run to make a correction.

How it works

  • Reverting a manual tax payment will not revert any related filing (just as manually marking a tax as paid does not mark any related filing as filed).
  • For states with combined electronic payments and filings, canceling an electronic tax payment also cancels the electronic filing (such as with most state unemployment insurance taxes).
  • If you schedule an electronic tax payment for a future date, Xero waits to submit the payment to the state agency until the day after your scheduled payment date. This means you can cancel a federal and state tax payment anytime before the scheduled date.

Revert a manual tax payment

Tax payments that are marked as manually paid can be reverted.

  1. Go to Payroll, then click Taxes & Filings.
  2. Select the manual tax payment you want to revert.
  3. Click Mark as Unpaid.

This removes all manual payments associated with that tax obligation for the tax period. If you've made multiple payments and the most recent is an electronic payment that is unprocessed (Scheduled status), cancel the pending electronic payment before reverting any manual payments.

If you only send one electronic payment per tax period (which must also be the first payment for the tax period), marking manual tax payments as unpaid allows you to make an electronic payment for taxes if you're enrollled for electronic payments.

Cancel an electronic tax payment

You can only cancel electronic tax payments that are unprocessed (Scheduled status). Pending tax payments cannot be canceled.

  1. Go to Payroll, then click Taxes & Filings.
  2. Select the electronic tax payment you want to revert.
  3. Click Cancel Electronic Payment.

This cancels the electronic payments associated with that tax obligation for the tax period. If you've made a manual tax payment after scheduling an electronic payment, revert the manual payment before canceling the electronic payment.

Correct a tax payment made in a pay run

If you want to correct a tax payment because an incorrect tax type was applied to an employee's pay:

  1. Make a negative payment for the same amount as the incorrect tax payment in an unscheduled pay run.

    Make an unscheduled pay run

  2. Go to the employee's profile in Xero and adjust their tax settings to make sure they receive the correct tax type in future pay runs.

    Add employee federal and state tax withholdings

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