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Experienced Member

Chicago Minimum Wage and adjusting for tips

Opening QSR restaurant in Chicago. Looking for a method to calculate payroll and process it in QBO taking into account the $12/hr minimum wage but able to take credit for the employee pooled tips to reduce hourly wage.


Do you set the employee up at an hourly wage of $12/hr and then take a deduction for tips received?  But then does that change the reporting of tips earned at end of year?  Would appreciate any advice on setting this up correctly.  Any shared spreadsheets or sub systems would also be appreciated. 

1 Comment

Re: Chicago Minimum Wage and adjusting for tips

Hi there, ChicagoRestAcct,


Thanks for visiting the Community for assistance.


I'm here to help share information on how to record tips on your employees.


In your case, since the tip you'd be given will be reduced to the hourly wage, then, you can set up a deduction pay type for this. 


Here's what you'll need to do:

  1. Click Workers in the left navigation menu.
  2. Go to the Employees tab, then click the name of the employee.
  3. Click the Pencil icon in the Pay section.
  4. On your Employees profile, go to question number 5 about Does (employee) have any deductions? and click the +Add a new deduction link.
  5. In the Deduction/contribution or garnishment field, choose Deduction/contribution.
  6. Choose New deduction/contribution in the Deduction/contribution field, and select Other deductions as a Deduction/contribution type.
  7. In the Type field, select Other after tax deductions.
  8. Enter Description which will appear on the paycheck, then enter employee amount deduction.
  9. Click OK.

From there, upon running payroll, the tips received will be deducted. 


Then, at the end of the year, you can adjust the employee’s W2 to post the Tips and Employees Pay correctly. For guidance, I recommend contacting your Accountant. This is to ensure that this process will be accounted properly.


As always, you can check our Community Help articles for additional information.


Keep me posted if you have any additional question about this setup. I'm always here to further assist.