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T
tweb
December 13, 2023
Question

paycheck tips

  • December 13, 2023
  • 1 reply
  • 0 views

I have a client who will start using QBO for payroll beginning 1/1/24.  They are a cocktail bar and the bartenders are paid only tips received (none directly--all goes through the employer).  The owner divides the tips by the number of hours worked for the evening to determine their "hourly rate" and they pay that rate for the hours each works.  They are guaranteed to recieve $10 per hour minimum so if the hourly rate computes to less than that, the owner makes up the difference so the employees receive the $10 per hour.  This is a newly purchases business and therefore the payroll reporting will be new for this new owner/employer.  I have currently set them up to use the "paycheck tips" feature and marked it as "commission only" (because it wouldn't let me use $0 hourly rate.  I'm unclear about how the employer tip credit works and whether I have set it up correctly in QBO.  We intend to have QB pay and file all payroll taxes. Thanks is advance

1 reply

R
rvrfrf
December 13, 2023

Welcome to the Community, tweb.

 

If your employees received tips from customers, you're required to track and withhold taxes from their tips.

 

The first step in paying and reporting tips is to determine which type of tips your employees have received. You mentioned you're currently working with paycheck tips. These tips are mostly received through credit or debit card charges, gift cards, or other electronic payments. You can give them to employees through their paychecks, along with their regular pay.

 

After determining which type of tips an employee has received, you'll need to set up a payroll item for them.

 

Here's how:
 

  1. In the left navigation bar, go to Payroll, then Employees.
  2. Find an employee and click on their display name.
  3. From your Personal Info screen, hit Edit.
  4. Under Additional pay types, choose Cash Tips or Paycheck Tips.
  5. Select Save.

 

You can also use the steps above to edit existing payroll items.

 

Once you've finished setting everything up, you can begin reporting tips on paychecks and payroll items. As you run your scheduled payroll, enter an amount for tips.

 

I've also included a couple detailed resources about working with tips and taxes which may come in handy moving forward:
 

 

Please don't hesitate to send a reply if there's any additional questions. Have a great Wednesday!

B
BABI
January 12, 2024

Does QBOP automatically calculate the "tip credit" when tips received aren't enough to bring tipped wage to match State minimum wage? How do you set it up?

R
ReymondO
January 12, 2024

Hey there, @BABI.

 

Currently, QuickBooks doesn't have an automatic feature for calculating tip credits in the system. Therefore, you'll need to manually set this up in the program to report tips on paychecks and payroll forms.

 

To pay tip credits, you can set it up as another hourly rate in QuickBooks. Here's how you can do it:

 

  1. Go to Payroll and click Employees.
  2. Select your employee.
  3. From Pay types, click Start.
  4. Select + Another hourly rate.
  5. You can change the Pay type name if you want and enter the Rate per hour.
  6. Repeat steps 4-5 if you need more pay items.
  7. When finished, click Save.

 

When you create paychecks, these rates will appear in the table, and all you need to do is enter the hours.


Please be aware that the regulations for tip credits vary by state. You can check this article to find details on tax forms, withholdings, unemployment, and other taxes, e-file and pay information, general state and agency information, and employer registration: Access state agency websites for payroll.

 

If you have additional concerns about tracking tips in QuickBooks Online, feel free to add them to the thread. I'm here to help. Have a great day!

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