Reported tips on W2s and 941

I'm here to sort out your payroll concern, KTZM.

Box 1 of the W2 form is for wages, tips, and compensation. While line 2 of Form 941 shows the same. You can check these articles as references:

• W2 form boxes explained
• How QuickBooks populates the 941

The payroll item shows in the dedicated boxes or lines because of how they're set up. You can refer to this article on how to report tips in and out of an employee: Report tips in and out on employee paychecks in QuickBooks Desktop Payroll.

As always, I suggest conferring with your accountant on how to accurately set up the payroll item.

We're just around if you have other payroll concerns. Don't hesitate to reach out to us again. 

If the tips aren't increasing boxes 3, 5 - SS and Medicare wages - or box 7 - tips wages - then that means the tips weren't taxed properly. 

At the same time, if the tips item is set up using the tips tax tracking type, it will still impact box 1, though it may also have not been taxed for box 1 (that's how box 1 works.)

Assuming you have not edited and changed your Tips payroll item, then you can verify this is the case by editing the item and reviewing it's tax selections:

If it looks like this, it is set up to be taxed and to impact the boxes:

If it looks like this, then the defaults were overridden and it was not set up to be taxed and so will not impact the boxes (except box 1):

And if it wasn't set up properly, then when the user who unchecked the boxes did that, they'd have received a warning like this:

If the tips item tax options are set up properly, and it was not edited it to be correct after the fact, one more possible way to create this situation, when using both Tips In and Tips Out items, is that the Tips Out item was not set up with the Tips tax tracking type, but it was also set up to be taxable, which is wrong.  In this case, if the YTD totals for Tips in and Tip out for an employee match, then the taxed wages and tax are negated and the W-2 won't show any resulting wages or tax (since there weren't any.)