Tips and service charges differ in how they work and how to record them, @Pdist. I'll discuss it below.
Tips are extra money customers choose to give workers directly. They can be cash, electronic payments, or even gift cards. Service charges are different.
They require fees the business adds to bills. Customers can't change these fees or choose who gets them. Because of this difference, we should label service charges as compensation in QuickBooks, not as tips. This helps keep our books correct and follows tax rules.
To handle service charges in QuickBooks, create a new payroll item specifically for them. Link this item to regular wage tax tracking. When paying employees, use this new item for service charges. Here's how:
- Lists > Payroll Item List.
- Select New.
- Choose Custom Setup, then click Next.
- Choose Addition and name the item.
- Choose the Expense account for tracking
- Set Tax tracking type as Compensation.
- Follow the prompts to finish the setup.
For more information about the steps, check this guided material: Pay and report tips.
To learn more about service charges in QuickBooks, check this resource: Service charge vs. tips: Basics and examples.
Additionally, here's an article that guides you on how to create and send your paychecks in QuickBooks Desktop payroll: Create and run your payroll.
Let me know if you have any further concerns or questions about payroll in QuickBooks Desktop by posting a response below. We're here to assist you.
