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piano3more
July 4, 2023
Question

Void A Payment to A Contractor

  • July 4, 2023
  • 1 reply
  • 0 views

I submitted a payment yesterday to the wrong contractor (July 3rd) . I tried to void the payment today (July 4th) via Quickbooks online however it said it could not be voided because the payment has already been processed. When I logged into my bank account however, the money has NOT been taken out of our account yet. How do I stop this?

 

If I cannot stop this, how do you advise I request the return from the contractor? I don't want to tax them on this return payment. Should I request a direct deposit? Zelle? Venmo? Or can I request the return via QB? I just want to make sure it's recorded correctly where not either individual is taxed on the transaction. Also, how do I avoid this payment from being included on their 1099 tax form, Quickbooks? 

1 reply

M
Maybelle_S
July 4, 2023

I can help correct the payment posted to the wrong contractor, piano3more. I'll share some details about deleting a contractor's direct deposit in QuickBooks Online (QBO).

 

The offload time for ACH processing of your Direct Deposit (DD) happens at exactly 5:00 p.m. Pacific time, two banking days before the scheduled pay date. Otherwise, we'll not be able to stop or reverse the transactions from posting to the contractor's account.

 

That said, we can create a journal entry to offset the contractor's direct deposit transaction amount. I'll guide you on how to do it.

 

  1. Go to the +New button.
  2. Under Other, select Journal Entry.
  3. On the first line, select the account in the field. Depending on if you need to debit or credit the account, enter the amount in the correct column.
  4. Select the other account you're moving money to or from in the second line. Depending on if you entered a debit or credit on the first line, enter the same amount in the opposite column.
  5. Check the amounts. You should have the same amount in the Credit column on one line and the Debit column on the other. It means the accounts are in balance.
  6. Enter information in the memo section to know why you made the journal entry.
  7. Hit Save and close.

 

Moreover, you can make an internal agreement with your contractor to facilitate the return of the funds once they have received the payment. You can initiate a direct deposit reversal within 5 business days from the date of payment.

 

Before proceeding, let me share information on when to perform the reversal. 

 

  • The reason for the reversal complies with ACH or EFT laws. For example duplicate payments or unintended payments.
  • The total amount(s) must be greater than $50 (due to the $75 direct deposit reversal fee).
  • The direct deposit paycheck wasn’t rejected.
  • It’s within 5 banking days (US) or 4 banking days (Canada) of the paycheck date. 
  • The bank account you want to reverse funds from must still be in the employee's profile.

 

Please be aware that a direct deposit reversal fee of $75 will be incurred, regardless of whether or not the funds are successfully recovered.

 

  1. Open the Direct Deposit Reversal form.
  2. Select New Request.
  3. Complete the required information and transaction information, and select Save.
  4. Once the reversal is approved, you can void the direct deposit in your records.

 

You'll get an email letting you know the request is accepted. If something is missing, your request will be sent back to you by email with instructions.

 

Additionally, you’ll receive an email once the request is accepted. The funds from your contractor will be taken out and will be credited back to you. This process takes up to 14 banking days from the day your request has been accepted. Once the payment is canceled, it'll not reflect on your contractor's 1099.

 

For more details on this process, check the following article: Reverse a direct deposit. It includes information on the things you need to do before and after the reversal request.

 

If you have clarification on the process or additional concerns, let me know by tapping the Reply button. I'll get back to you as soon as possible. Have a good one!

P
piano3moreAuthor
July 5, 2023

I called my bank this morning and they said they can still stop the payment. They are waiving any fees. You mentioned a $75 fee that QB charges. If my bank is able to stop the ACH business to business transaction, why is QB charging a $75 fee? All I need for QB to do now is to recognize the payment didn't happen and to NOT record it in the contractor's 1099. A reminder, we are talking about a contractor, not an employee so there is no "paycheck". Please advise.

JaeAnnC
JaeAnnC
July 5, 2023

Chiming in on this thread to share additional information about voiding a contractor payment in QuickBooks Online, @piano3more.

 

The $75 charge is only applicable when you requested a direct deposit reversal to get the money back. Since your bank initiates the cancellation, you will no longer need to reverse the deposit. Thus, QBO will no longer charge any fees.

 

Once the cancellation is successful, you can now void the direct deposit payment in QBO. Here's how:

 

  1. Go to Expenses and click Vendors.
  2. Select the contractor.
  3. Look for the payment you want to delete or void and click the View/Edit dropdown.
  4. Select Delete or Void.
  5. Click Yes to confirm changes.

 

If you're unable to delete the payment in QBO, utilize the Journal Entry to offset a contractor's direct deposit transaction amount. 

 

Also, you don't need to worry about posting the payment to your contractor's 1099 since the direct deposit was unprocessed and canceled by your bank. 

 

Furthermore, QBO helps you prepare and file your 1099s seamlessly, using the details you already have in your account. For more information, I suggest reading this article: Get answers to your 1099 questions.

 

Let me know whenever you have additional queries about paying your contractors. The Community is always open to lend you a helping hand. Be safe and have a wonderful rest of the day!

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