payroll

Let me share with you some information about handling and recording tips.

Employee tips are subject to payroll taxes. They're reported depending on how they received them. Choose from the steps below depending on how your employees received their tips:

Create a payroll item for taxable tip amount

Use this item to record all the tips received.

1. Go to the Lists menu and then Payroll Item List.
2. Press CTRL + N.
3. Pick Custom Set Up and then Next.
4. Choose Addition and then Next.
5. Name the item (for example, Tips In) and Next.
6. Enter the expense account and then Next.
7. In the Tax tracking type window, choose Reported Tips. Click Next and Next again.
8. In the Calculate based on quantity window, choose Neither and select Next.
9. In the Limit Type window, click Finish.

Create a payroll item for tips retained by the employee

Use this item to take away the amount that the employee physically received.

1. In the Payroll Item List window, press CTRL + N.
2. Click the Payroll Item drop-down and select New.
3. Pick Custom Set Up and then Next.
4. Choose Deduction and then Next.
5. Name the item (for example, Tips Out) and Next.
6. In the Liability account field, choose the same account as the one entered in the Expense Account field of the addition payroll item for taxable tips.
7. In the Tax tracking type window, pick None. Click Next and Next again.
8. In the Calculate based on quantity window, select Neither and Next.
9. Choose Net Pay and Next.
10. In the Limit Type window, click Finish.

Once done, enter these items on the employee's paycheck. For more information, check out this article: Report Tips In and Out on Employee Paychecks.

Feel free to get back to us here again if you have additional concerns. We're always around to help in any way we can.