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Active Member

I had a customer pay an invoice and include a tip. How do I record this as it does not go to individual employees?

 
3 Comments
QuickBooks Team

Hello there, iconstruction_ll, Let's add a line item so w...

Hello there, iconstruction_ll,

Let's add a line item so we can record tips in your invoices

By doing so, you'll be able to keep track of your customer's tips. Before recording it directly to your invoice, let's perform the step-by-step process provided below.

First, you need to choose an account to use for your tips (if you haven't added one yet). Here's how:

  1. Go to the Gear icon, then choose Account and Settings.
  2. Select Advanced.
  3. Go to the Chart of Accounts section. Then select the pencil icon.
  4. From the drop-down, choose your desired account for tips.
  5. Select Save.

Next is to set up a Product/Service called Tip and use it in adding a line item in your invoice. Please follow the steps below:

  1. Go to the Gear con, and then select Product and Services.
  2. Select the New button.
  3. Choose Service.
  4. Input all necessary information of the service.
  5. Once done, click the Save and close button.

After completing the process above, you can now add tips as a line item by editing an existing invoice, creating a new invoice for just this tip, or creating an invoice including the tip amount in it.

    For additional information, you can go refer this article: Add tips to Sales Receipts.

    In the future, in case you want to pay your employees with tips in their paychecks, you can follow these steps:

    1. Go to the Plus (+) icon, and then choose Check.
    2. For Bank Account, select the account from where you are making the liability payment.
    3. For Pay to the order of, select the employee to whom you are paying the gratuity or tip distribution.
    4. Enter the amount of the liability payment.
    5. Under Account, select the Tips account.
    6. Fill in the rest of the check as you normally do, and then click Save and Print or Save.

    Please don't hesitate to leave a comment if you have further concerns about entering tips in QuickBooks Online. I'm just around if you need help.

    Experienced Member

    Re: Hello there, iconstruction_ll, Let's add a line item so w...

    I have customers who pay their invoice online and will include a tips. The tip is considered an overpayment of the invoice.  If I record the tip as an item on the invoice, won't it affect my sales revenue and be included in my sales tax report?

     

    Second, when creating a new service item for tips, do I select the "income account" to a tip current liability account and uncheck the box "is taxable"? 

     

    Thanks in advance.

    Moderator

    Re: Hello there, iconstruction_ll, Let's add a line item so w...

    Hello leeleeg,

     

    QuickBooks Online has feature that allows you to add tips, however it is only available for sales receipts.

     

    For invoices, there are two ways to add the tips. You can include it as an item on the invoice, or add it when you deposit the invoice payment.

     

    The tip item won't affect your sales revenue as long as you set up the associated account correctly.

     

    The tip account is created automatically once you turn on the Tips feature. Though, here's how you can create it manually:

    1. Click the Gear icon in the upper-right corner and select Chart of Account.
    2. Click the New button and select Other Current Liabilities in the Account Type field.
    3. Select Other Current Liabilities in the Detail Type field.
    4. Enter the account name and click Save and Close.

    Then, let's associate the account to the tip item:

    1. Click the Gear icon in the upper-right corner and select Products and Services.
    2. Click the New button and select Service or Non-inventory as the item type.
    3. Enter the tip details and go to the Sales information section.
    4. Enter Undistributed Tips in the Income account field.
    5. Remove the check mark in the Is taxable box.
    6. Click the Save and close button.

     You can now use this when you create the invoices. And you'll notice that the system will only calculate the sales tax for the taxable items.

     

    Let me know if you you need more assistance with this.