Refund your customer for a paid invoice in QuickBooks Online

by Intuit •

1333 •

Updated 9/15/2026 19:17

If you have QuickBooks Payments, you can refund a customer who has already paid an invoice with a credit memo. you can refund a customer who has already paid an invoice with a credit memo. Then, you create an expense to issue the refund, and link the two transactions.

Use this method for a refund involving a lost package or the Accounts Receivable (A/R) account. If you want to refund individual items or services, create a refund receipt instead.

An icon showing cash and a payment card To issue a refund directly in QuickBooks, check out QuickBooks Payments rates and apply.

This video will go over how to issue a refund if you used QuickBooks Payments to charge your customer, and then go over how to issue a refund for any other kind of payment.

Get personalized help categorizing transactions with Full-Service Bookkeeping.

Video transcript

[0:00] When you need to refund a customer, there are two ways to record it in QuickBooks. Let's go over how to issue a refund if you used QuickBooks Payments to charge your customer, and then go over how to issue a refund for any other kind of payment. Note that this is for refunds only.

[0:16] If you want to give someone credit that they can use on a future purchase, you would use a credit memo, and there's a link to that video over here. If you used QuickBooks Payments to process a payment from your customer, go to the sale you recorded. If it is an invoice, select the link to the payment. Then select More…Refund.

[0:37] Note if it is a sales receipt, just select more and refund right from the sales receipt. Select Yes, refund payment. QuickBooks fills out a refund receipt for you based on the original sale. Confirm the information.

[0:55] Select save and send if you want to email it to your customer or choose another save option if you don't. Once you are done, select save and send if you want to email it to your customer or choose another save option if you don't. If you received a payment in any other way, select New…Refund Receipt. Note that these steps record the refund in QuickBooks.

[1:19] If you use an outside payments processor like Stripe or Paypal, you'll still need to process the refund with them to get the money back to your customer. If you know the customer's name, enter it here. But you can also leave this blank. Enter when you refunded your customer. Then enter the payment method, which is how you paid the customer back.

[1:41] If you don't see the correct payment method, select Add new. Note that this only records the refund. To pay the customer back, you'll still need to write them a check or process the return with your payment processor. In the Refund From field, enter the account you used to refund them. This will usually be a bank account.

[2:02] If you wrote them a check, you can enter a handwritten check number or print it later if you want QuickBooks to print it for you. If you need help with that, see the link at the end of this video. Next, enter the product or service you refunded them for. Then the dollar amount. If this is a taxable product, QuickBooks will also include sales tax.

[2:24] This refunds the customer for the sales tax you collected, and it also reduces your sales tax liability. Once you are done, select save and send if you want to email it to your customer or choose another save option if you don't. Later, when the refund clears your bank or credit card, you'll see it in the Transactions screen.

[2:44] QuickBooks will match what you've downloaded to the refund receipt you entered earlier. Select Confirm to connect what you recorded to what you downloaded to make sure QuickBooks doesn't count it twice. Now you're ready to record refunds to customers in QuickBooks.

What you’ll need

The original paid transaction (invoice).
The customer's preferred payment method.
The bank account you are refunding from.

Create a credit memo

First, create a credit memo to record the credit on the customer's account.

Go to All apps , then Sales & Get Paid, then Invoices (Take me there).
Locate the paid invoice you want to refund.
Select More actions, then select Create a credit memo.
Make sure the Customer field is correct. (It should be pre-filled.)
Enter the Credit Memo Date.
Adjust the Product/Service, Amount, and Tax if necessary; these are automatically added from the original transaction.
- Note: If you are refunding an inventory item, QuickBooks adds it back to your inventory. If the item is defective or you don't want to add it back, you will need to make an inventory adjustment.
Select Save and close.

Create the refund expense

Next, create an expense to record the money you are refunding to the customer.

Select + Create.
Select Expense.
From the Payee ▼ dropdown, select the customer you are refunding.
From the Payment account dropdown, select the bank account the money is being refunded from.
In the Category column, select the Debtors account (Accounts Receivable).
In the Amount field, enter the total amount of the refund.
If you collect sales tax, select the appropriate Tax option.
Select Save.

Link the refund to the credit memo

Finally, link the credit memo and the expense to show the credit has been refunded.

Select + Create.
Select Receive payment.
From the Customer ▼ dropdown, select the same customer.
Fill in the Payment method and Deposit to fields.
In the Outstanding Transaction section, select the checkbox for the Expense you created.
Make sure the balance is $0, as the credit memo and expense will cancel each other out.
Select Save and close.

Results

After linking the transactions, your customer's account will show the credit memo as paid, and the refund expense is recorded. Your accounts receivable and bank account balances will be correct.

Next step

If you use online banking, go to Bank transactions to find and match the refund record when it appears in your bank feed.