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Hello!
Here are the problems:
1. A restaurant has been running QBO payroll with tips being added to gross and then deducted with "paycheck tips" connected to a "tips paid" liability account instead of just using "cash tips." In doing that, it creates a positive liability account in the amount of tips paid.
2. All bank deposits from credit card machine have been categorized as sales income, which we all know is incorrect because SOME amount is tips collected and SOME amount should go to a sales tax payable account (not concerned with at the moment let's focus in the tips portion, I know how to fix the sales tax bit). I can do a JE debiting the sales account... and generally I would say credit a tips current asset account, but for the previously mentioned paycheck problem.
So how do I debit the liability account to zero while also debiting the sales account by the tips amount. I know how it's SUPPOSED to work and will work from now on, but how do I FIX the historical inaccuracies.
I will take a JE to fix the past, OR if there is a way to change all the past checks (which are not editable because forms have been filed) in order to get rid of the liability I would enjoy that option as well.
TIA.
Thanks for becoming part of the Community, balderas.
To properly identify how you should go about debiting your liability and sales accounts to correct invalid tips, I'd recommend working with an accounting professional. If you're in need of one, there's an awesome tool on our website called Find an Accountant. All ProAdvisors listed there are QuickBooks-certified and able to provide helpful insights for driving your business's success.
Here's how it works:
Once you've found an accountant, they can be contacted through their Send a message form:
I've also included a couple detailed resources about working with tips and journal entries which may come in handy moving forward:
Please feel welcome to send a reply if there's any questions. Have a wonderful day!
Thanks Zach, but I am the accounting professional.
I have a team that has tried to come up with a fix. We know how double entry accounting works.
I'm asking here, because I'm hoping a QB professional will have the resources to look through past remedies for this particular problem - this can't be the first time someone has entered tips wrong on paychecks. We have exhausted all of our options.
I know you're just doing your job, and that's probably what you're supposed to send when you can't find an answer, but "go find someone else" isn't going to work for me.
We we're touched by how understanding you are with our job, balderas.
We appreciate for taking the time to share your issue in this forum. In problems like this, I recommend reaching out to our support team so they can take a closer look and double-check how tips are being entered. Aside from that, they have the tools to pull up your account in a more secure manner. They can use a glance (screen share) which can identify the issue perfectly and in a quicker way. Here's how to reach them:
Other than that, you may want to add your employees' pay to their setup, here's a reference that you might want to read for additional information: Add Pay History To QuickBooks Online Payroll.
Let us know if there's still anything else that you want to ask about tips. We're here to make sure that everything is covered.
Thank you, I wanted to check here before I called support just in case.
I'll add a solution to this thread when I get it fixed for posterity.
Did you ever get a solution? I have the same issue, and similarly cannot find any account (or QuickBooks support person) who can help me.
We use a Clover POS system, and every night it (correctly) posts Sales to an Sales (income) account, tips to a Tips (liability) account, and sales tax to a Sales Tax (liability) account. We use the Paycheck Tips option and enter the amounts into the QuickBooks payroll system manually. I then have two problems:
1) The Tips are added into the Employee Wages (expense) account, distorting my P&L because there is no corresponding entry on the Income side.
2) My Tips liability account never gets debited by the payroll system once the checks are distributed.
My fix: I created a "Employee Tip Wages" (contra expense) account and after each paycheck is run I debt the Tips liability account and credit the contra-expense account. At least that way the liability is removed and the sum of Employee Wages less Employee Tip Wages is an accurate representation of our true employee payroll (which means the P&L is accurate).
If you found a better solution please share it, as the forum help here only knows how to give canned answers or tell you to "seek professional help."
This is exactly my issue! I also added a "tips expense" to shift the tips to, but that can't be the only way. I found a way to "map" the paycheck categories, but it keeps telling me there's an error when I try to link the tips expense account and it doesn't allow linking a liability or income account so it's all just ridiculously complicated for something that should have been automatic in the first place. Especially if you set up payroll through quickbooks the way they tell you to. They created the liability account, but they don't pull the payroll tips from it? Ugh.
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