processed severance as 1099 instead of W2 --how do I fix it?

Thanks for sharing your concerns in the Community, @PR_LTC. 

If your employee was listed as a vendor, you'll need to inactivate him and ensure to add him as an employee. 

Here's how to inactivate a vendor:

1. Go to the Vendor menu and select Vendor Center.  
2. Locate and double-click the Vendors name. 
3. Mark the box for Vendor is inactive, then OK. 

Once done, add him as an employee and enter a number or add a letter since QuickBooks is unable to save duplicate information. 

After that, follow the steps to void or cancel contractor payments. From there, you can now enter the paycheck with the correct taxes withheld.

For future reference, you can bookmark this page to guide you when it's time to File your W-2 forms.

Feel free to message again if you have more questions. I'll be right there to help you again.

Thank you. Since the vendor payment was made in a prior quarter (Q2) should I date the corrected transaction for the same date or for now in Q4?

If Q2, then should pay the payroll taxes for both employer and employee and file an amended quarterly federal payroll tax form for Q2 and state UI? The vendor payment was cashed and cleared in QB Q2, so it'll mess with my reconciliations.

If Q4, then I pay the PR taxes for both employer and employee? 

I appreciate any help.

Hi there, PR_LTC.

Thanks for getting back to us. Allow me to chime in and help record your correct transaction for your employee in QuickBooks Desktop (QBDT).

You’ll need to enter the amounts by paycheck date in the current quarter. You can use the Payroll Setup to add your employee's prior paycheck info instead. Here's how to do it:

1. In QBDT, go to the Employees menu at the top, then select Payroll Setup.
2. In the Payroll setup screen, click Payroll History.
3. Select the Yes, have paid employees in [year] radio button, and then Continue.
4. Select Yes or No on Consolidate paychecks for the previous quarters, then tick Continue.
5. Choose the employee you want to enter paycheck details for and then hit Edit payroll history.
6. Enter the paycheck amounts as a total for each previous quarter or by paycheck (depending on what you selected in step 3). You’ll need to enter the amounts by paycheck date in the current quarter.
7. Once you’ve added all the paychecks for that employee, select Done.

Then, when you’ve paid taxes for your previous payrolls, you’ll need to enter those payments. This info determines how much you still owe and ensures your future tax payments and filings are accurate.

For further guidance with adding prior payroll info in QBDT, consider checking out this article: Add payroll info to QuickBooks Desktop Payroll when you already paid employees this year.

I'm also adding this article that tackles managing and filing your W-2 forms for future reference: File your W-2 forms.

For more tips and other resources, I recommend visiting our website: Self-help articles.

Please leave a comment in this thread if you have follow-up questions about this or anything else QuickBooks. I'm more than willing to help. Take care always.

Thank you!  The employee was paid a lump amount, lets say $1000 for purposes of discussion, as a 1099 and has cashed the check, . When I process this as a payroll check in the current quarter, the payroll taxes and federal withholding will be deducted from this amount and the net will be say $700.  It seems that I am responsible for paying both the employer and employee share of the payroll taxes since I can no longer collect them from the employee, yes? But I cannot pay the employee's withholding since the employee should be 100% responsible for paying his income tax on this money. Please advise. 

Hi there, @PR_LTC

Yes, the paycheck will be recorded as instructed by the suggestion shared by my colleague above to ensure the taxes in question are correctly calculated. Since the check has already been cashed and you're still unsure how to cater the taxes withheld, I recommend contacting your accountant.

They can provide you with the best accounting practices to follow the situation you got with the taxes of your check. You can use whit link if you haven't found someone to work with: QuickBooks Certified ProAdvisor.

Let me know in the comments below if you have any other questions. Take care always!