Labor Deductions

Good day, @bstepp. I'd be glad to help you record this transaction in QuickBooks Desktop (QBDT).

Once you're about to write checks to your sub-contractors, you can add a deducted amount (payment to your customer) to another line item and use an Accounts Receivable (A/R) account. This will increase your A/R balance and deposit it to your bank. After that, you can create another check and use the deposited amount to pay your customer. 

Here's how to create a check:

1. Go to the Banking menu and select Write Checks.
2. Choose the bank account in the Bank Account drop-down list.
3. Enter the date and choose the accounts or items in the line items. You'll have to deduct the amount you'll use to pay to customers in these line items.
4. Select the Accounts receivable account on the other line item and enter the amount you've deducted from the sub-contractors.
5. Fill out the rest of the field and click Save & Close.

Once done, deposit the funds to your bank using the Record Deposits / Make Deposits feature. After that, create another check to pay your customer. You can add another category item to track the labor deduction and use it when writing checks.

If you need help setting up a category, I'd suggest getting in touch with your accountant. They can also provide you with guidance on the best way to record these transactions in QuickBooks.

If you have any more questions or concerns, please don't hesitate to comment below. Have a good rest of your day!

@bstepp 

I think it makes the most sense to write a check to the contractor and include a line item for the amount withheld as a negative amount.  Assign the same category to that line item that you assigned to the payment you made to the customer.  That will reduce both the payment to the sub and reduce the expense that was recorded when you paid the customer.