Mistakes happen, even in payroll. If you’ve ever needed to reverse a direct deposit in QuickBooks Online Payroll, you know the old process was less than ideal: forms, fees, and a fair bit of frustration. Thankfully, QuickBooks has rolled out improvements that simplify the process, but there are still important steps and cautions to keep in mind.
What’s Changed?
Direct deposit reversals can now be initiated directly within QuickBooks Online Payroll. No more external forms, no more $75 fee, and no minimum reversal amount. This update is available for all QuickBooks Online Payroll users in the US (as of November 2024), and this is already live in Canada.
When Should You Request a Reversal?
You can request a reversal if you paid an employee or contractor twice, paid the wrong person, or entered the wrong amount or bank account. Keep in mind, a reversal does not guarantee the funds will be recovered. Also, requests must be submitted between the third and fifth business day after the original paycheck date.
How to Request a Direct Deposit Reversal
Here is an excerpt from Intuit's "In-The-Know" Webinar on this update
Here’s a step-by-step guide, adapted from QuickBooks’ official instructions (full article here):
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Check Eligibility:
- Make sure the original paycheck wasn’t rejected. If it was, the funds will be returned to your bank account automatically, no reversal needed.
- Confirm you’re within the allowed window (3rd to 5th business day after pay date).
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Initiate the Reversal in QuickBooks:
- Go to the Paycheck list in QuickBooks Online Payroll.
- Select the direct deposit(s) you need to reverse.
- Choose the reason for the reversal (duplicate, wrong amount, wrong account, etc.).
- Submit your request. You can process multiple reversals at once if needed.
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Wait and Monitor:
- It can take seven to ten business days for the reversal to complete.
- Check your bank account and QuickBooks transactions to confirm the funds have been returned.
- If successful, void the paycheck in QuickBooks. If you use contractor payments, see the official guide for voiding those payments.
If the Reversal Fails
If you don’t see the funds after ten business days, the reversal was not successful. Do not void the paycheck. Instead, work directly with the employee or contractor to recover the funds, then void the paycheck once you have the money back.
Important Cautions
- An employee or contractor can dispute a reversal for up to 60 days. If the reversal is disputed after funds have been returned, Intuit may debit your company’s bank account for the disputed amount.
- If you’re unable to request a reversal within QuickBooks, you may still use the external reversal form, but a $75 fee applies.
Stay Informed
For ongoing updates and more detailed guidance, always refer to the official QuickBooks support article and consider registering for monthly webinars through the In the Know hub.
Mistakes in payroll are stressful, but with these new tools and a bit of caution, you can resolve most issues quickly. If you have questions or want to talk through a tricky payroll situation, I’m here to help.
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