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Error: The vendor payment transmission failed

SOLVEDby QuickBooksQuickBooks Desktop PayrollUpdated July 16, 2021


When sending direct deposit for independent contractors you receive the following error:

The vendor payment transmission failed.
Click here for a description of the problem and possible fixes.
If this problem persists, please contact customer support.

When the "here" link above is clicked the Intuit Payroll Service Account Information screen will open.  These additional error messages will appear:

One or more direct deposit vendor payments failed.

There was at least one payment to a non-1099 vendor in the direct deposit vendor payments you sent on XX/XX/XXXX at ##:##.  Unfortunately, we can't process direct deposit payments to vendors who are not independent contractors (1099 vendors), so all the vendor payments in the transmission failed.

You will need to remove the payments you've made to non-1099 vendors (by changing the payment method to printed check or, if appropriate, marking the contractor as a 1099 vendor) and resend the payments you're making to 1099 vendors.  Click here for more detailed instructions for correcting and resending the payment transactions, as well as alternatives for making electronic payments to non-1099 vendors.

Only 1099 vendors can be paid with this service.  Remove the non-1099 vendor payments and resend the payment transaction.  For additional explanation, instructions, and options see payroll.com/DD4V.


This problem is caused because one or more of your independent contractors is not marked as a 1099 vendor.


In order for Intuit to meet Federal and State compliance requirements on a consistent basis across all of our offerings, the Intuit Direct Deposit service cannot be used to pay bills or make payments to individuals or entities who are not independent contractors.

What is an independent contractor?  Use the resources to determine if individual providing services is a employee or independent contractor:

To resolve this error:

  1. Determine how many and which vendor direct deposit checks you are sending.

    Click E mployees > Send Payroll Data and reviewing the Items to Send window.   Click Banking > Use Register to review each direct deposit entry to determine who the payments are for.
  2. Determine which vendors are not marked as 1099:

    You can check each Vendor individual or create the report below.

    1. In QuickBooks, go to Reports > Vendors and Payables > 1099 Summary.
    2. In the 1099 Options, click the first dropdown button and select Only 1099 vendors. Review the report and see if the amounts are missing.
    3. In the 1099 Options, click the first dropdown button again and select All vendors. If the report shows the missing amounts already, then the vendors for the missing amounts are not marked as Eligible for 1099.

If your vendor is not an Independent Contractor:

You must change the direct deposit payment to a regular check. Locate the check from the register, double-click to open and remove the checkmark next to Online Payment then click Save & Close.

          If your vendors are Independent Contractors: Turn on 1099-MISC and mark your vendors eligible for 1099s:

  1. Open QuickBooks.
  2. Click Tax: 1099 on the left.
  3. Click the Company Preference tab.
  4. Next to Do you file 1099-MISC forms? select Yes.
  5. Click OK to save the preference.
  6. Choose Vendors > Vendor Center.
  7. Right click on a vendor's name and then click Edit.
  8. Click the Address Info tab and validate the data.
    • Make sure the Address field contains the appropriate two-letter state abbreviation and the correct ZIP code.
    • If the vendor is a person, the vendor's legal name should appear in the First Name, M.I., and Last Name fields.
    • If you know the company name but not the person's name, leave the Company Name field blank to prevent double names from appearing on the 1099-MISC form.
  9. Select the Tax Settings tab.
  10. Checkmark the Vendor eligible for 1099.
  11. Enter the vendor's tax identification number in the Vendor Tax ID field. Click OK to save your changes.
  12. Repeat steps 6 through 11 for each 1099-eligible vendor.
  1. Once you have completed making changes to your vendors and/or payments in QuickBooks, resend your payments to Intuit.  Click Employees > Send Payroll Data and click Send All.

Preventing Future Failed Transmissions:

For non-1099 vendors, the user will need to remove the direct deposit information from the vendor record to prevent inadvertently creating an incorrect direct deposit payment in the future.
To do this:

  1. From the Vendors menu, click Vendor Center.
  2. From the list on the left, double-click the 1099 vendor you want to remove from direct deposit.
  3. On the Additional Information tab, click Direct Deposit.
  4. In the Direct Deposit window, clear the Use Direct Deposit for checkbox.

Related Articles

Paying independent contractors using Direct Deposit
Set up a vendor and print 1099/1096 forms
Sign up and set up Direct Deposit for Independent Contractors

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