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Distribute tips to employees through QuickBooks Online Payroll

by Intuit Updated 5 months ago

Set up a liability account to accrue tips before they are paid to employees

  1. Follow these instructions to set up a new account.
  2. Select the account type Liabilities.
  3. Save your account under Other Current Liabilities.
  4. Set your tax form section as Undistributed Tips.
  5. Give the account a name that makes sense to you, such as Undistributed Tips.
  6. Select Save.

Set up a Payroll item for tips in QuickBooks Online

  1. Go to Payroll, then Employees.
  2. Select your employee.
  3. From Personal Info, select Edit.
  4. In Additional pay types, select Controlled Tips.
  5. Select Save.

Check the mapping for your reimbursements

  1. Go to the Gear icon on the top right side and select Payroll Settings.
  2. Under Accounting, select the pencil icon.
  3. Scroll down to Wage Expenses and select the pencil icon.
  4. Select Each employee's wages are posted to different types of accounts.
  5. Scroll down to Controlled Tips and choose Undistributed Tips.
  6. Select Save, then Done.

When tips are collected

  1. When entering income, make sure the portion representing tips is categorized in the Undistributed Tips account, rather than the any income account.
  2. If you enter income from the bank feed, click on the transaction that contains both income and tips.
  3. Select Split.
  4. Enter the appropriate amounts on each line for Income and Undistributed Tips.

How to distribute tips to employees

  1. Run your payroll as normal.
  2. For each employee that you have added tips as a pay type, there will be a box labelled Payroll Tips. Enter the appropriate amount for each employee.
  3. Finish payroll.

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