Payroll tax calculations

Xero uses the agency rules and guidelines calculate state and federal payroll tax amounts after you run a pay run.

How Xero calculates payroll taxes

Calculations change as pay runs are added, or if corrections are made. Xero also recalculates taxes for a previous tax period if your organization creates an unscheduled pay run to correct payroll errors. If Xero recalculates liability for a tax, and the recalculation results in additional taxes that are past due, the corrected tax amount displays as Overdue in Taxes & Filings.

After viewing the organization’s liability, you can mark the tax as paid.

State liability calculations

Xero tracks the taxes that each state and city requires, and automatically calculates them.

Federal liability calculations

Xero can calculate the following federal taxes for your organization:

  • Unemployment
  • Social Security
  • Medicare
  • Income

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