How To... Reverse a Payment
When a check is returned from the bank (insufficient funds, closed account, stop payment, etc.) it will be necessary to reverse the payment so that the account will show due again.
If the returned check has paid multiple years or multiple entities, then you will need to get the amount of the tax, penalty, interest, and attorney fees paid for each year and entity.
You will then add an adjustment for each year and entity keeping in mind that the adjust amount will be the sum of the tax, penalty, interest, attorney fee, and discount amount paid for that YEAR and ENTITY.
NOTE: This can also be seen as a refund. The taxpayer paid you the money with a check and the check was returned. So now you have to "refund" the money so that the account will show due. This is important to remember because if the check was entered at the end of the month and you have balanced your month end reports (which means that your books are showing that the money has been collected), then when you enter the check reversal, the adjustment is entered as if you were entering a refund.