How do handle a tip for sub contractor?

There are several ways on how to clear the overpayment from your customer, John R.

First, when you receive the overpayment, you'll be prompted if you want to refund the amount or keep it as credit. You'll want to create a credit memo, then post it to a current liability account for the tips. You can follow the steps below.

1. From the Customers menu, select Create Credit Memos/Refunds.
2. From the Customer:Job drop-down, select your customer.
3. Enter the items you're giving credit for, then click Save & Close.

Once you disburse the tips, make sure to pull it up from this liability account. 

However, if you want to show the amount to the sub-contractors on their 1099, you can create an item for the tips, then record the overpayment to an income account. Then, create an invoice to allocate the overpayment. 

Lastly, you can create an account where you want to record the tips. Then, choose this account when matching your sub-contractor's check. 

For future reference, you can run reports in QuickBooks Desktop so you can easily track your business. Read this article for more information: Understand Reports.

Please let me know if you need further assistance. We're always right here to help.

Thank You Maria for your response!

I apologize, I am a bit confused. When I am creating the credit memo, I am not crediting anything. This is an over payment meant as a tip for the crew so I don't think I would be crediting any item? If I did create the credit memo, how do I post it to the current liability account? The credit memo will let me refund it to the customer. I just want to tie it into the cash in drawer, is this possible? Please let me know. Thank you for your help.