That definitely sounds worth looking into a little deeper, because when I’ve used manual check in Square Payroll, my understanding has always been that I’m responsible for issuing the check myself, while Square still withdraws payroll taxes and related liabilities separately — not the employee’s check amount as a second payment.
A couple of things I’d want to confirm: when the money was withdrawn, was it showing as payroll taxes only, or the full employee net pay amount? And under your payroll settings, is there any chance direct deposit was still enabled at the company level even if the employee never entered bank details? If the withdrawal is matching exactly what you wrote manually, I’d definitely recommend contacting Square's customer support at 1-855-700-6000 so they can review the payroll records and tell you exactly where those funds were routed.
