Can I record a deduction to a contractor's payment? Where to I enter the deduction so when I write the contractor a check the deduction pops up so I can deduct on check?

Hi there, @Kristen_DBS. 

You can create a vendor credit in QuickBooks Online. You may use it to deduct your payment when paying a contractor's bill. Here's how:

1. Click the + New icon and select Vendor credit.
2. In the Vendor dropdown, choose your vendor.
3. Depending on how you record purchases with this vendor, enter the Category details or Item details. 
4. Select Save and close.

For more references, here are articles to help you track all money you've paid to a vendor for a particular date range:

• Run a report with vendor totals.
• What is the difference between bills, cheques, and expenses?
• How do I handle vendor credits and refunds? 

Let me know if you have other questions about QuickBooks. I'll be right here to help you out. Have a great day.

Thank you for your prompt reply.  This is for a contractor that I pay by check, but occasionally he receives a payment on my behalf.  We would like to record this amount due from the contractor, to be deducted from his next check.  I did create a Vendor Credit and when I went to write this contractor a check, the Vendor credit pops up on the right (which  is what i was hoping for), I click it to add and it gives me a message: You cannot add a credit for a vendor without any open bills. :/

Thank you for following up, Kristen_DBS.

I'd like to share some insights about vendor credits in QuickBooks Online.

Vendor credit is linked to your Accounts Payable account which only means it can be associated with a vendor bill.

That being said, to track credits for your vendors, you should consider entering bills in QuickBooks. This way, you can track your account balance and credits using Accounts Payable. Otherwise, you can add and use notes to remind yourself about this credit in the future.

Get back to me if you still have other follow up questions about vendor credit. Have a nice day!

I have what may be a related situation. I recently switched from Desktop to Online. Employee payroll is fine, but we also have an independent contractor that we pay commission each month. Additionally, we deduct certain expenses from their check, such as computer systems and telephone expenses. We pay those expenses up front, but bill them back for their portion by deducting in from their commission check. With Desktop, I could put the commissions on one line with a positive number and the expenses on following lines with a negative amount. Online does not allow negative numbers to be entered when writing a check, so this approach no longer works. I spent nearly 90 minutes with a QuickBooks advisor today and still no resolution. There has to be a way to do this. Can anyone help?

Thanks for joining this conversation, @Dave631.

Allow me to hop in and share information about entering a deduction on your contractor's check in QuickBooks Online (QBO).

I tried replicating this on my test account, and I was able to enter a negative amount on a check. Are you getting any specific error messages when doing this on your QBO account? Any additional information will help me provide the best resolution.

Here's a sample screenshot from my test account.

In the meantime, let's sign in to your QBO using a private browser (incognito). There are times that the browser is already full of frequently accessed page resources (cache and cookies), causing some unusual responses.

Here's how:

• Press Ctrl + Shift + N (Google Chrome).
• Ctrl + Shift + P (Firefox).
• Control + Option + P (Safari).

Once logged in, try to create the check again to verify.

If it's successful, return to your default browser and perform a clear cache to refresh the system. However, if the issue persists, try using other supported browsers.

For more information about managing and creating contractor checks in QBO, you can refer to this article: Pay a contractor with a paper check.

I also recommend visiting our website for more tips and other resources you can use in the future: Self-help articles.

Please post again or leave a comment in this thread if you have additional questions about this or anything else QuickBooks. I'll be here to help. Stay safe always.

I am trying to pay by direct deposit, which seems to take me to a different screen than the one shown.

Any further help on how to get around this issue when doing a direct deposit? Thanks.

Any further ideas on how I can do this while paying this as a direct deposit? Thanks.

Hello, Dave. 

Thanks for getting back to us! I'll hop aboard and clarify some information about adding deductions on direct deposit checks. I'll also lay down some options on how we can record a check with the deductions for your contractor. 

To shed light on the issue, we're unable to add a deduction on direct deposit checks for contractors. As what you've experienced, the system will keep correcting the check, and will only include the expense account (positive amount). 

Though as mentioned by my colleague, FritzF, we can add the deduction on a manual check (not through direct deposit). 

For our options, we'll want to create a manual check by clicking on the arrow drop-down menu on the Contractors page, then selecting Write check. 

Add the deductions and the expense accounts as pointed out by FritzF, then click on Save and Close. 

Issue the check to the contractor or process the net amount payment manually through a bank transfer (if issuing the check isn't possible). 

Another option is to simply process the check with the direct deposit service, then void or delete it after the contractor has received the net amount. To void a check:

1. Go to Expenses, then click Vendors.
2. Select the contractor's name.
3. Look for the payment you want to delete or void, then click View/Edit.
4. Select either Delete or Void.
5. Click Yes to confirm changes.

Then, create a manual check with the deductions. 

Need more details about voiding or deleting checks for corrections? Check out this article for more information: Void or cancel contractor payments. 

Are you managing 1099 contractors in QuickBooks? We'll want to bookmark and read this article for a guide if you need help creating their 1099 forms in the future: Create and file 1099s using QuickBooks Online. 

Do you have more questions about managing vendor transactions? Or do you need to do some other tasks in QuickBooks? Let me know and I'll clarify the details, or lay down some guides for you. 

I'll see you around again. 

How to record a deduction item on a direct deposit payment to a contractor? 

1. Create the deduction item 
2. Create contractor payment with his/her net pay when you run the direct deposit payment.
3. Go back to the Vendor profile, and transaction list to locate the check
4. Modify the items on the check to reflect the correct items, enter a negative amount for the deduction item, and it will reflect the correct net pay.

I'm not sure if you ever figured this out, it was from 3 years ago lol.  I was having the same issue as you and this came up on google search.  I found that you need to enter it as a vendor credit.  Then you have to go to the actual vendor in the vendor center and write their check from there instead of going to the pay bill option.  At that point you'll see their open bills and open vendor credit on the right side.  Pick what you want and it works perfectly!  Hopefully you figured it out before I did !