I mistakenly included reimbursement with Contractor payroll. How do I back out the reimbursement and reclassify?

Hi, 

To back out the reimbursement from Contractor payroll in QuickBooks and reclassify it:

1. Edit the Payroll:

   • Go to the payroll transaction, locate the contractor payment, and edit the reimbursement amount by removing it.

2. Create a New Transaction:

   • Manually create a new expense or bill to properly classify the reimbursement under the correct account (like “Reimbursements”).

3. Reconcile:

   • Ensure both the contractor payment and the reimbursement are correctly classified in your accounting records.

Thank you for the response and sorry for the delay.

I clicked on Payroll / Contractors, and selected the contractor. I see the list of payments and selected the payment w/ the reimbursement. A window opened showing the direct deposit transaction and has 2 buttons, Void and Close. I tried to Void, but received a message sating that it cannot be Voided b/c of direct deposit and has already processed.

I must be in the wrong place in QB?

Please advise.

Thank you.

Forgot to mention that the reimbursement and the contractor payroll were entered as a lump sum, one line entry.

We appreciate your response with additional details about the contractor payment, Kent. I'll share details about correcting payments made through Direct Deposit.

Given that the payment has been processed, we are unable to void or make any changes to the transaction. Once a Direct Deposit payment is processed and transferred to the receiver's bank account, the transaction is considered final.

It would be best to contact the contractor to recover the reimbursement.

Then, create a journal entry or apply a negative entry line if you have additional payments to be processed for this contractor. Here's how to create an offsetting entry:

1. Click the + New and select Journal entry.
2. Enter all necessary details about the offsetting entry.
3. Add details or information in the Memo section so you know why you made the journal entry.
4. Click Save and close.

However, I'd recommend reaching out to your accountant to check what works best in this situation.

Additional details about this process can be found in this article: Void Or Cancel Contractor Payments.

I also suggest saving or bookmarking these articles about managing contractor payments for future reference:

• Reverse A Direct Deposit In QuickBooks Payroll
• Deduct Federal Backup Withholding From Contractors

Please feel free to reach out to us again if you have any other questions about paying contractors or related payroll tasks in QuickBooks Online. I'd be happy to provide additional guidance or explanations as needed.