I use an outside payroll service. I need to enter the info into QB, but am having a problem with the tips/gratuity for employees. I am out of balance. My questions:
1) What new accounts (type included) do I need to set up in the chart of accounts? I have: Tips Clearing (Bank) and Employee Tips IN (Other current liability). Am I missing an account?
2) In detail, what are the exact steps to enter the info. I've followed other recommended answers, but to no avail.
To start, when I make a deposit, I credit Sales acct. & Employee Tips IN (liability acct.). Is that correct?
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I'm having a similar issue. My p & L says I have tons of $$$ which I do not and I'm convinced its because I'm not properly tracking the tips. AAAGGHHH.
Example $200 in sales ($100 cash/$100 credit card)
recorded as $200 deposited into cash drawer. credit cards clear the next day ($100 sales $50 tips)
$150 goes into bank account.
$50 left in cash drawer but my staff took those $50 already. How do I show the debit?
I’m very sorry, but if tips a company receives meets the 4 criteria under IRS rules, it is NOT to be recorded as income to the company. If it is a “gratuity” that a company sets the amount and requires it to be paid, the IRS does not consider it a tip. Unless you’re doing a JE to IMMEDIATELY transfer the tip dollars received to a liability account (I.e. Tips Payable), tips should not be recorded as income to the company and show up on the P & L.
When money is received and it meets the criteria that the IRS has set to be considered tips, it should NOT be included with or recorded as income to a company. Unless the company immediately reclasses those dollars to a Liability account (i.e, Tips Payable”, counting it as income is incorrect.
"Example $200 in sales ($100 cash/$100 credit card)"
Do not confuse Payment Type with Sales.
"recorded as $200 deposited into cash drawer."
Sales credit is All Sales, or are Tips in that value? Because you expect that Tips are in the Payments. That is where you got confused.
"credit cards clear the next day ($100 sales $50 tips)"
Then it is Not $200 of Sales. And this only totals $150; what happened to that difference? Did you mean:
$150 Sales income <== these Three Lines offset each other
$50 Tips Liability <== these Three Lines offset each other
$50 Taken from Cash Till by Servers <== these two lines Offset each other
which is matched to the entry for $50 Borrowed by the Servers as Employee Loan (other current asset) <== these two lines Offset each other
And then $200 as paid by checks, cash and CC charges as Settlement <== these Three Lines offset each other
Plus, you usually need an Over/Short entry as linked to income
And you might need a Sales Tax Liability item
"'$50 left in cash drawer but my staff took those $50 already. How do I show the debit?"
That is Employee Loan. It is Other Current Asset. Like this:
They Borrowed $50.
Then, tips through payroll is Gross $50, clearing the Liability account. It gets Taxed. In your business where you allowed them to Take Money already, then you also need the Loan Repayment item, as Employee Loan repayment Deduction, like a wage garnishment, to clear that Other Current Asset for $50, to avoid it adding to take home. They Already Got it.
yes, this is where people often get it wrong: "Unless you’re doing a JE to IMMEDIATELY transfer the tip dollars received to a liability account (I.e. Tips Payable), tips should not be recorded as income to the company and show up on the P & L."
You won't JE tips. You also don't mix Tips into Sales. A lot of people never considered that the Money is not Sales. The Money is the Banking. Not the sales.
Here are Two Bookmarks for Summary Sales, that helps. There is a blog for Desktop, and a Video for QB Online: