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Set up reported tips

If you need to set up all of your payroll (compensation, benefits, employees, taxes, and payroll history), run the Payroll Setup interview. Shortcut

If your food and beverage employees receive tips from customers, these tips are subject to payroll taxes.

  • If employees turn in tips, or customers charge tips on credit cards, and you add these tips to employee paychecks, you need the first payroll item below.

  • If employees keep the tips and report the amount to you, you need both payroll items below. Use them together on paychecks, making the deduction amount the same as the amount of reported tips. The net effect is to increase the payroll taxes on the paycheck.

Create a payroll item for taxable tips

Create an addition payroll item for the taxable tips. For the tax tracking type, choose Reported Tips.

Payroll item for tips retained by the employee

Create a deduction payroll item for the tips retained by the employee. For the tax tracking type, choose None.

Important: In the Liability Account field, choose the same account as the one you entered in the Expense Account field of the addition payroll item for taxable tips.

See also

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