diff --git a/tasks.py b/tasks.py
index a19a0d8..70f3205 100644
--- a/tasks.py
+++ b/tasks.py
@@ -114,6 +114,14 @@ async def _process_invoice(
         payment_status = await check_transaction_status(wallet_id, payment_hash)
         if payment_status.success:
             break
+        if payment_status.failed:
+            return {
+                "error": {
+                    "code": "PAYMENT_FAILED",
+                    "message": "Payment failed.",
+                },
+                "in_budget": in_budget,
+            }
         await asyncio.sleep(0.05)
     if not payment_status:
         raise Exception("Payment status not found")
diff --git a/tests/unit/test_tasks.py b/tests/unit/test_tasks.py
new file mode 100644
index 0000000..cca51bb
--- /dev/null
+++ b/tests/unit/test_tasks.py
@@ -0,0 +1,31 @@
+from types import SimpleNamespace
+
+import pytest
+
+from ... import tasks
+
+
+@pytest.mark.asyncio
+async def test_process_invoice_returns_payment_failed_on_failed_status(monkeypatch):
+    async def fake_tracked_spend_nwc(*args, **kwargs):
+        return True, "a" * 64
+
+    async def fake_check_transaction_status(wallet_id: str, payment_hash: str):
+        return SimpleNamespace(success=False, failed=True)
+
+    monkeypatch.setattr(tasks, "tracked_spend_nwc", fake_tracked_spend_nwc)
+    monkeypatch.setattr(
+        tasks, "check_transaction_status", fake_check_transaction_status
+    )
+
+    result = await tasks._process_invoice(
+        wallet_id="wallet123",
+        pubkey="a" * 64,
+        invoice="lnbc1example",
+        amount_msats=1000,
+        description="test",
+    )
+
+    assert result["error"]["code"] == "PAYMENT_FAILED"
+    assert result["error"]["message"] == "Payment failed."
+    assert result["in_budget"] is True