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Experienced Member

How best to handle paycheck tips in QB Online?

I do books for a cafe and when I enter the credit card tips on the daily sales receipt, I post it to a liability account called "tips in."  Then when I run payroll, I would like to be able to pay tips and post them to a liability account called "tips out." These would both be sub-accounts of a "payroll tips" account on the balance sheet, and should theoretically wash to zero as tips are paid. But QB online version does not allow me to use a liability account for a payroll item, and I have to use an expense account called "paycheck tips."  Then I have to make g/l entries to move the amount paid back to the liability account.  Am I missing something here? Why would they want paycheck tips on the P&L and not the balance sheet?  How is everyone else handling this?

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Best answer 04-18-2018

Accepted Solutions
ProAdvisor

Re: How best to handle paycheck tips in QB Online?

@tulsirose

 

Most of the payroll services would have the option to handle TIPS the way you want it but unfortunately, QBO payroll doesn't have that option. Intuit has hard-wired to a specific expense account rather than based on preference setting. So, it seems you've two options:

 

1) continue the way you're doing —reclassify with a journal entry
2) record tips directly to default expense account instead of liability account (which is normal accounting method). Time to clear tips in/out from P&L would be very short (less than 1-month max) so it may not be a big issue. Ask your Accountant.

 

Hope this helps!

Super Explorer ***

Re: How best to handle paycheck tips in QB Online?

Assuming you are using QuickBooks Online, there are two tips items that you can use.  "Cash Tips" and "Payroll Tips".  You set those up in the Payroll items.  With the restaurant I handle all tips are paid out in cash every day to the employees.  I believe most restaurants cash out their tips daily but you can wait and pay credit card tips with payroll as a "Payroll Tip" item.

 

I set up the "Cash Tips" item for the restaurant I handle.  On the DSR (Daily sales report) all cash tips are recorded at the bottom for each wait staff member and separate between cash tips and credit card tips.  The daily sales receipt is entered as a zero sales receipt (it must come to 0 before you hit enter) as follows:

I have 2 sales items.  One taxable and one non taxable (for sales tax)  Most are taxable so the daily sales receipt would look like this

Sales      800.00  (this would be total sales.. NOT including any tips at all.. not even the credit card tips)

CCTips (this items is directed to CC Tips Payable)    50.00

CCTips (I use this one to break down who was paid and this is also directed to CC Tips Payable to 0 out tips collected and then paid out below.)  so....

CCTips  (name of waitstaff)                                            (25.00)

CCTips (name of 2nd waitstaff)                                    (25.00)

The above enters the cc tip liability and the payouts

CCSales  (This is directed toward "CC Deposits.. a cash account) this items reflects the total credit card receipts.. including CC Tips  (-750.00)

Cash (This items is directed towards a banking account called "Cash on Hand" (50.00)

The net result of all the entries is 0.00 and then you hit enter

 

The reason you do put CC tips into the CCSales is because those do hit your bank.  They are not a sales to the company and are paid out in cash daily... The 50.00 paid out will actually reduce cash on hand and available for deposit.

 

Cash  (this item

 

13 Comments
QuickBooks Team

Re: How best to handle paycheck tips in QB Online?

Hello Tulsirose,

 

I've got an article that we put together to help you out with being able to manage tips here: https://community.intuit.com/articles/1430662  Let me know how that works out for you and if you have more questions. 

Experienced Member

Re: How best to handle paycheck tips in QB Online?

Hi Dwayne,

 

I appreciate your response, and I've read the article,  but it's not addressing the issue I have regarding tracking the tips liability on the balance sheet.

ProAdvisor

Re: How best to handle paycheck tips in QB Online?

@tulsirose

 

Most of the payroll services would have the option to handle TIPS the way you want it but unfortunately, QBO payroll doesn't have that option. Intuit has hard-wired to a specific expense account rather than based on preference setting. So, it seems you've two options:

 

1) continue the way you're doing —reclassify with a journal entry
2) record tips directly to default expense account instead of liability account (which is normal accounting method). Time to clear tips in/out from P&L would be very short (less than 1-month max) so it may not be a big issue. Ask your Accountant.

 

Hope this helps!

Experienced Member

Re: How best to handle paycheck tips in QB Online?

@vpcontroller Thank you - that was very helpful.  I had thought about having a "tips in" account on the P&L as an "other income" account, to offset "paycheck tips", but I hadn't thought about directly posting tips to the "paycheck tips" account - which is what I think you are saying -   and then it would clear when I run payroll.  I'm thinking that may be more straightforward than the GL entry every month.  

Super Explorer ***

Re: How best to handle paycheck tips in QB Online?

Assuming you are using QuickBooks Online, there are two tips items that you can use.  "Cash Tips" and "Payroll Tips".  You set those up in the Payroll items.  With the restaurant I handle all tips are paid out in cash every day to the employees.  I believe most restaurants cash out their tips daily but you can wait and pay credit card tips with payroll as a "Payroll Tip" item.

 

I set up the "Cash Tips" item for the restaurant I handle.  On the DSR (Daily sales report) all cash tips are recorded at the bottom for each wait staff member and separate between cash tips and credit card tips.  The daily sales receipt is entered as a zero sales receipt (it must come to 0 before you hit enter) as follows:

I have 2 sales items.  One taxable and one non taxable (for sales tax)  Most are taxable so the daily sales receipt would look like this

Sales      800.00  (this would be total sales.. NOT including any tips at all.. not even the credit card tips)

CCTips (this items is directed to CC Tips Payable)    50.00

CCTips (I use this one to break down who was paid and this is also directed to CC Tips Payable to 0 out tips collected and then paid out below.)  so....

CCTips  (name of waitstaff)                                            (25.00)

CCTips (name of 2nd waitstaff)                                    (25.00)

The above enters the cc tip liability and the payouts

CCSales  (This is directed toward "CC Deposits.. a cash account) this items reflects the total credit card receipts.. including CC Tips  (-750.00)

Cash (This items is directed towards a banking account called "Cash on Hand" (50.00)

The net result of all the entries is 0.00 and then you hit enter

 

The reason you do put CC tips into the CCSales is because those do hit your bank.  They are not a sales to the company and are paid out in cash daily... The 50.00 paid out will actually reduce cash on hand and available for deposit.

 

Cash  (this item

 

Experienced Member

Re: How best to handle paycheck tips in QB Online?

Thank you for such a detailed answer, Tena_Lewey! I'm sorry I'm just seeing this now. Much appreciated!

QuickBooks Team

Re: How best to handle paycheck tips in QB Online?

I'm happy to see you were able to get this answered, @tulsirose

 

@Tena_Leway provided some great information about the difference between paycheck tips and cash tips, as well as more information for you to record these types of transactions.

 

If you do have any other questions, please feel free to reach back out. 

Super Explorer ***

Re: How best to handle paycheck tips in QB Online?

Your welcome, hope it helped.

Experienced Member

Re: How best to handle paycheck tips in QB Online?

Sorry, I am stuck on this as well. 

 

So the Undistributed tip account is an expense account not a liability account? Correct.

 

Then they type is Payroll Exitances and I sub to Distributed Tips.

Please let me now if I set this up. I do not want it showing on the balance sheet since it is not liable to the company after the tips are paid out?

 

 
Experienced Member

Re: How best to handle paycheck tips in QB Online?

How are you clearing the balance in the tips liability account when you process payroll?  Using outsourced payroll and a JE for payroll recording.

 

Thanks.

QuickBooks Team

Re: How best to handle paycheck tips in QB Online?

Hey there, @EA4ever18.

 

You can either clear the tips on your liability account by creating a check. Let me guide you how.

 

To create a check, here's how:

  1. Click on the Plus icon (+), then choose Check.
  2. From the Choose a payee drop-down, select the employee to whom you are paying the tip distribution.
  3. From the Bank Account drop-down, choose the account from where you are making the liability payment.
  4. Under Account, select Undistributed Tips, then enter the tip amount in the Tip column.
  5. Fill in the rest of the check, then select Save and Close.

But since you're using outsourced payroll and journal entries, I recommend getting in touch with your accountant. This way, he/she can advise you on how to handle this.

 

I've attached an article that might come in handy: How to Record a Tip and Add Tips on the Employee Paycheck?

 

Feel free to click on the Reply button if you have any other concerns. 

Experienced Member

Re: How best to handle paycheck tips in QB Online?

Hi Tulsarose,

I am having the very same issue. I am really frustrated because we have discrepancies on our P & L because the cc tips that our servers make are showing up as expenses, not as a Liability. It's the same concept as the Sales Tax Liability. When I download transactions from my bank, it clearly doesn't break down the tips from the taxes and base pay, just the total net pay. I really need help!

QuickBooks Team

Re: How best to handle paycheck tips in QB Online?

Thanks for joining this conversation, Blondie8788.

 

When adding tips to an employee's paycheck, QuickBooks Online (QBO) use an expense account. Since you want them to be posted in the liability account instead, you can create a journal entry to move them from the expense account.

 

Before we proceed with the steps, I highly suggest consulting your accountant or accounting professional for guidance on which account receives the debit and credit side of the transaction.

 

Here's how:

 

  1. Click the Plus icon to get to the Journal Entry.
  2. Enter the necessary information.
  3. Once done, hit Save and close.

 

For additional information, check out these articles:

 

 

I want to make sure everything is taken care of for you, so let me know if you have any other issues or concerns. I'll be here to help. Have a good one!