Refund

Refund customers and vendors in QuickBooks Online

There are several ways to record refunds in QuickBooks Online, depending on whether you are refunding a customer or applying a vendor credit. The method you choose also depends on how the original payment was made (credit card, check, or debit card).

Refund a customer

When you need to return money to a customer, the standard method is to use a Refund Receipt. This records the return of funds and updates your bank records.

To issue a refund via check or credit card:

1. Select the + New button at the top right.
2. Choose Refund Receipt from the menu.
3. Select the Customer you are refunding.
4. Fill out the product or service details and the amount to be refunded.
5. In the Payment method field, select how you are refunding the customer (e.g., Check, Credit Card).
6. In the Refund from field, select the bank or credit card account where the funds are coming from.
7. Select Save and close.

Note: If you select Credit Card as the payment method, you may see an option to “Refund payments in QuickBooks.” This allows you to process the refund directly through the QuickBooks Payments system. Per Payment Card Industry (PCI) regulations, a refund processed to a credit card must have an original offsetting sale. Refunds are typically supported up to 90 days after the original sale.

Record a vendor credit card refund

If a vendor refunds a credit card you used for business expenses, you need to record the deposit to your credit card and apply it to the original bill.

To apply a vendor credit card refund to a bill:

1. Select the + New button.
2. Select Credit Card Credit (sometimes labeled as “Refund Credit Card”).
3. In the “Bank/Credit Account” field, select the specific credit card account the refund was posted to.
4. In the detail area, choose the Accounts Payable (A/P) account in the category column.
5. Enter the amount and select the Vendor.
6. Select Save and close.
7. Go to the + New menu again and select Pay Bills.
8. Select the specific bill you want to apply the credit to.
9. The credit you just created will appear in the “Credit Applied” section. Ensure it is applied to the bill.
10. Select Save.

Record a debit card refund

QuickBooks Online does not have a specific “Debit Card” form for refunds. To record a refund coming back to a business debit card, you can use a workaround using a clearing account.

To record a debit card refund:

1. Go to Settings (gear icon) and select Chart of Accounts.
2. Select New to create a new account.
3. Set the Account Type to Credit Card and name it something like “Debit Card Clearing Account.”
4. Select Save and close.
5. Select the + New button.
6. Select Credit Card Credit.
7. In the “Bank/Credit Account” field, select your new “Debit Card Clearing Account.”
8. Fill out the remaining details (vendor, amount, expense category) and select Save and close.

Handle tax refunds (GST)

If you used the automated File GST feature in QuickBooks Online, your tax refund is automatically set up as a receivable. You simply record the deposit when you receive the funds from the tax authority.

If you did not use the automated filing feature, we recommend consulting a ProAdvisor to ensure the receivable and deposit are recorded correctly for your region’s tax laws.