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Level 1

Recording Card Tips for Tax Purposes

Hi there! I own a coffee stand in WA State. My girls receive credit card tips on our POS system (not linked to QuickBooks) that are distributed + taken home at the end of each shift. At this time, our business is paying the tax liability on these credit card tips until I can figure out how to apply the liability to them individually.


My plan is to have them record what they made in credit card tips at the end of each shift + somehow take the tax out of their paycheck during payroll. 

We only run payroll once a month so I would really like them to be able to continue to take these tips at the end of each shift rather than pay them out during payroll. 

Is there a way to do this? I use QuickBooks Online.

1 Comment 1
QuickBooks Team

Recording Card Tips for Tax Purposes

Welcome to the Community, cvcoffeeco. I'm here to share some knowledge and assist you in tracking those tips in QuickBooks Online.


You must keep track of and deduct taxes from any tips that your employees received from clients. Also, If the tip is less than $20 per month, tips aren’t subject to federal taxes.


Tips received through credit card and debit card charges can be added to your employees' paychecks alongside their regular pay to ensure that taxes are also properly tracked.


To do this, you'll need to set up a payroll item for tips in QuickBooks. 


Here's how:


  1. Go to Payroll, then Employees.
  2. Choose your employee.
  3. Click on Edit from Personal Info.
  4. In Additional pay types, select Cash Tips or Paycheck Tips.
  5. Once done, hit Save.


I'm adding this article for more information: Pay and report tips.


You can also visit this link and use it as a reference in the future: Year-end checklist for QuickBooks Online Payroll.


For other concerns about tips and payroll taxes, let me know by leaving a comment below. We're always willing to assist. Have a wonderful day!

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