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Senior Explorer *

How to receive, record, and payout Employee TIPS when a customer provides a check and I provide a Sales Receipt?

Here's the situation!

 

I have some customers that pay with a check the day we provide service. They include a monetary TIP for the employee(s) with that payment on their check they use to pay for the entire service. For example, they owe the company $110.00 but they add $40.00 TIP so the total check is $150.00. I take their check, when the employee hands it in, and I add the total amount (including the TIP portion) to a Sales Receipt. How do I pay the employee(s) the TIP portion so it shows up on their Earning Statements & not affect the company tax liability? How do I prevent Quickbooks desktop from adding TAXES to the EMPLOYER side (FICA), when I run payroll? I use Quickbooks Desktop Premiere w/quickbooks payroll service.

 

I currently have in Chart of Accounts: TIPS IN, Other Income; TAX-Line Mapping-Unassigned.

Payroll Item List: TIPS OUT. Tax Tracking type: REPORTED TIPS, TAXES: At this point, Quickbooks will not let me select EMPLOYEE only items only i.e. Medicare Employee, Social Security Employee. It defaults to both Medicare Company & Employee  and Social Security Company & Social Security Employee. This should not be. The company did not make this money. The employee did.

 

Please let me know how to do this correctly.

 

Thank you, in advance,

6 Comments
QuickBooks Team

Re: How to receive, record, and payout Employee TIPS when a customer provides a check and I provi...

Hi CLM1,

 

The default taxes settings in QuickBooks Desktop are in compliance with IRS. And at this time, the option to select an "employee-only tax" setting is currently not part of those set by IRS.

 

You'll want to contact your accountant to learn the tax tracking type you need to choose.

 

Once you have it, you can go to Lists, and then Payroll Item List to edit the item.

 

Feel free to read this article for more details: Report tips in and out on employee paychecks in QuickBooks Desktop Payroll.

 

You might also find this article helpful: E-file W2 and W3 in QuickBooks Desktop Payroll.

 

You can always swing by if you have more questions. 

 

 

 

 

 

 

 

Senior Explorer *

Re: How to receive, record, and payout Employee TIPS when a customer provides a check and I provi...


@ShiellaGraceA wrote:

Hi CLM1,

 

The default taxes settings in QuickBooks Desktop are in compliance with IRS. And at this time, the option to select an "employee-only tax" setting is currently not part of those set by IRS.

 

You'll want to contact your accountant to learn the tax tracking type you need to choose.

 

Once you have it, you can go to Lists, and then Payroll Item List to edit the item.

 

Feel free to read this article for more details: Report tips in and out on employee paychecks in QuickBooks Desktop Payroll.

 

You might also find this article helpful: E-file W2 and W3 in QuickBooks Desktop Payroll.

 

You can always swing by if you have more questions. 

 

 

Hi ShiellaGraceA, 

 

Thank you, for your response. 

 

I do have Tips in/out set up as noted in your link:  Report tips in and out on employee paychecks in QuickBooks Desktop Payroll. This is the one I used to set it up, and I have a note out to my accountant to find out what the Tax Tracking Type should be within Quickbooks Desktop.

 

I just can't see how to select only the Employee for tax burdens only. The company did not make the money being provided in the form of a Tip; that goes directly to the employee(s) only, not the company's bottom line; correct? Therefore, the company should not have a tax burden for the Tip amount -- no FICA, no Federal, etc., only the employee(s).

 

Also, you mentioned I could just come on in. Where are you located?

 

Thank you, 

CLM1


QuickBooks Team

Re: How to receive, record, and payout Employee TIPS when a customer provides a check and I provi...

Thanks for getting back to us here in the Intuit Community, @CLM1.

 

Allow me to step in and clarify this for you.

 

We stay compliant with the IRS regulations when it comes to reporting taxes.  

 

The Medicare and Social Security are combined, which is why we are unable to exempt the company from paying FICA when adding employee tips on paychecks.

 

To learn more on how to run payroll in QuickBooks Desktop, you can go through this link: Create paychecks.

 

If you need assistance with this, please let me know and I'd be glad to lend a hand.

Senior Explorer *

Re: How to receive, record, and payout Employee TIPS when a customer provides a check and I provi...

I really appreciate your help. Thank you, for that.

 

So, here's what our accounted noted: Tip income to employees, whether cash, check, or any other means, is taxable income for FICA, for both the employee and the company; even though the company did or does not get to claim the TIP as income. The company, by IRS law must fork out the additional FICA associated with any and all TIPs, if an employee makes more than $20.00 a month in TIPs. 

 

For example, (and this is an exaggeration but is not far off from the potential an employee can earn over time) If, an employee, gets an additional $400.00 in TIP income, from one of your customers or from several of your customers, in a day, the employee must report the TIP income, and the company & the employee must pay FICA on that TIP income, even though the company doesn't benefit from that income! It is without question, and added expense of doing business. The accountant recommended not accepting TIPs because it is an added TAX burden for the employer. 

Senior Explorer *

Re: How to receive, record, and payout Employee TIPS when a customer provides a check and I provi...

Thank you, for your help. I've added my discovery with in this thread; I think it's here. 

 

So how would I record, or differentiate the TIP income form the check on a Sales Receipt? Do I need to make a new Sales Item?

QuickBooks Team

Re: How to receive, record, and payout Employee TIPS when a customer provides a check and I provi...

Hi there again, CLM1,

 

Thanks for getting back to the Community and provide an update.

 

In your line with your concern, to record or differentiate the tip income, you can create other charge item then post it to liability account.

 

To create other charge item, here's what you'll need to do:

  1. Go to Lists menu at the top, then click Item List.
  2. On the Item List window, select Item then choose New.
  3. Choose Other Charge, then fill in the necessary item fields.
  4. In the Account field, choose a Liability account.
  5. Click OK.

That's it! If you have further questions, please feel free to visit the Community again. Have a great day!