Payroll Tips

Let me help you change the account mapping for the payroll tips, thebookkeepingmam.

You can go to the Payroll Settings and change the details so the tips are booked to a different account. Here's how: 

1. Go back to the Gear icon and select Payroll Settings.
2. Look for Preferences and click on it, then select Accounting Preferences.
3. Go to the Wage Expense Accounts section, then click the drop-down list for the tips, and then select the liability account that you want.
4. Click OK. 

Allow me to give you more articles and references for additional guidance when running payroll in QBO: 

• Run Payroll Reports 
• Payroll Tax Compliance Links 

Reply to me or visit us again if you have further queries. We're always here to help you any time of the day.

Thank you for your suggestion, however the instructions you gave are incorrect and your solution did not work.  I had to go to Gear -> Payroll Settings -> Accounting -> Wage Expenses -> Paycheck Tips in order to access what account Paycheck Tips is booked to.  When I click on the drop down menu to change that account, the only options I have are expense accounts.  The liability account that the tip amount is booked to through the Square syncing app is not listed.  How do I fix this?

~Kim

Thank you for getting back to us, @thebookkeepingmama.

I can share some information about the account that you can set for paycheck tips.

Wage expense accounts, including paycheck tips, can only be set up as expense accounts.

You can edit this liability account or add an expense account for your Square. However, I suggest consulting an accountant for further guidance.

See this article for more information about setting up and adding accounts to your chart of accounts: Add an account to your chart of accounts in QuickBooks Online.

To know more about taxability and how cash and paycheck tips are reported on federal forms, check out this article: Supported pay types and deductions explained. 

I'm always here if you have further questions about setting up your wage expense accounts and or anything else, by leaving a reply below. 

I am wondering, if you suggest create expense account for payroll tips, how will you link them with undistributed tips that are setup in chart of account as Undistributed Tips as liability account that connect tips paid by patrons and distributed to employees thru payroll. The account Undistributed Tips should be balanced.

Hello there, @ML55.

I'm here to ensure your Undistributed Tips account is balance. 

Linking an expense account into a liability account (undistributed tips) is not possible. You may create a Journal entry to move the expenses to the undistributed account. 

While doing this, I recommend consulting an accountant for additional guidance on posting correct accounts. This way, you're able to make sure that your account stays accurate. But if you don't have one, you may use our Find an Accountant tool. 

To create a journal entry, here's how:

1. In the left menu, click the + New button.
2. Select Journal entry.
3. Under the Journal date, enter the date.
4. Enter the other necessary information.
5. Select Save and close.

For future help, to ensure your QuickBooks balance matches with your bank or credit card statement balance, here's an article about reconciling an account : Reconcile an account in QuickBooks Online.

Get back to me here if you have any other concerns in managing your QuickBooks account. I'm always here to help. Take care always.

Hi Mirriam,

I am accountant and know very well how to do journal entries. I am relatively new to QBO and find more and more that QBO is not developed well to meet accounting needs compare to QB Desktop version. As I read thru different posts, supposed to be two ways of dealing with paycheck tips paid by patrons. One of them to post them as Tip Income and process the tips thru payroll as expense. Second way,as it is stated, can be done by posting paid tips to current liability account "Undistributed Tips" and then distribute them to employees thru pay checks. The problem with QBO development is that these accounts impossible to link without doing manual work thru creating separate expense account like Paychecks Tips and manually balance "Undistributed Tips" account thru additional J.E.. It does not make sense. In my opinion, QBO should able to link account "Undistributed Tips" on both ends: patrons pay of tips and payments them to employees.