Step 1: Go to the "Payments" Tab
Step 2: Select the payment(s) you would like to mark as returned.
Step 3: Click the Actions drop down menu, then click Return Payment.
Step 4: Enter the date that the bank returned the payment, select the bank account that the payment was returned from, and enter an explanation of why the check was returned.
Step 5: Click the return button. This will automatically create a transaction in the "Transactions" tab with the details you input and with a reverse of the payment linked to it.
It is important to note, if your bank account is linked with Plaid, a transaction for the return will also flow in. Make sure to delete that duplication.