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.