Paycheck Tips sync with Undistributed Tips Account

Tips in would be income and tips out will be an expense, QB online does not allow these accounts to be under liabilities, the important thing at the end would ensuring that the balance resort to Zero. In simple term because this funds are paid to your business, and not as a loan from your self or family into the company it is considered an income. And because you are also paying this out to the staffs it is also considered an expense which works similarly to a liabilities account  

Did you ever figure this out?  I am in the same boat where the credit card tip received off the Sales Receipt is recorded directly to the Undistributed Tips Liability Account.  When I process payroll and use the Paycheck Tip set-up in QuickBooks Online to pay out the tip, not the tip in and out option since it wasn't cash, it won't reduce my liability.  This has to be done by a journal entry each month. 

I have the same setup and the liability account (Unpaid Tips) is untouched after paying tips out. So what is the correct journal entry to clear out this liability account?

Since the creation of tips on the Sales Receipt defaults to Undistributed Tips, why does it have to be so difficult?  Requiring a journal entry to clear this account is a lot of extra work for a small business.  Money comes into the liability account, goes out on the paycheck.  QBO, please fix this.

Would be nice if a Quickbooks rep could answer this....

I also really need a solution to this issue. 

I have the same issue as well. Would be nice when you pay out tips in payroll check the amounts are also deducted from undistributed tips account. Does anyone know what journal entry i can use to fix this and zero out the undistributed tips account correctly?

Did anyone come up with a solution? I have the same issue.

Good morning, MF Arepas.

Thanks for reaching out here in the Community. I'd be glad to provide some info regarding accepting tips in QuickBooks Online.

Depositing tips to your bank account will debit the bank, and credit the tips account. The credit will be listed when the deposit has been made.

I recommend checking out the following article for details on how to record tips and gratuities in QuickBooks. This next link provides even more info about tips and paychecks. Lastly, this article mentions the steps to add tips to sales receipts.

I suggest speaking with your accountant about this information, and to find out the best way to make these entries, depending on your account set up.

If you need assistance with the entries or anything else, please don't hesitate to reach back out. I'll be here to help in any way that I can.

Did you ever get an answer to this question? I still have $$ sitting in Undistributed Tip (Liability account) and I'm not sure what Journal Entry to enter. I also paid out all tips using "Paycheck Tips".

I also have this same problem. This works perfectly in Quickbooks Desktop. Now that I'm using Quickbooks Online, it doesn't associate the paycheck tips with the liability account. Has anyone resolved this? What a pain.

Has anyone figured out how to do this?  The amount under Payroll Expenses for Employee Wages is their total paycheck amount, including tips, but I still have Undistributed Tips as a liability.   Do I need to go back and edit the way I entered Tips on the sales receipts as its own line item instead of using the QB Tips option?

Welcome to the QuickBooks Community, jdodge. For this particular situation, we recommend that you reach out to an accountant to see what is the best approach for your business. If you do not have an accountant, no worries, we got you covered! We have a program called ProAdvisor, where experts provide helpful insights to guide your business. They even offer a free consultation. Here's how to connect with them:

1. Select this link to go on the website.

2. In the Find an expert in section, choose what you're looking for, then use your search field to enter a City or ZIP code.

3.  Select Search.

4.  Browse through the results and find one that works best for your business. 
   

    

Please let me know if you have any questions on concerns. My team and I will do our best to assist you. I hope you enjoy the rest of your day!

The usual useless reply from a QBO advisor who actually has no idea what the person asking the question is talking about. 

As for the original question, I have to create a journal entry every payroll to deal with this issue. 

What Journal entry are you entering to clear out the liability account?

Unfortunately, this in not helpful - I do not believe it is an accountant issue, but rather a flaw in QB Online design.  Someone mentioned earlier that this feature DID worked in QB Desktop, but does not work in QB Online.  Could QB just look at the programming for Desktop to fix this issue?  

The journal Entry

Debit  Undisturbed Tips

                         Credit Tip Income

The income cancels the expense after you pay your employee. 

Example you received a 10.00 tip. It goes into undistributed Tips (on your Balance Sheet).   You add the $10.00 to your Employees Paycheck Tips in Payroll.  

Journals Entry   Debit Undistributed Tips 10.00 and Credit Tip Income 10.00

I am having same problem. Additionally, I'm baffled why tips is being included in gross pay for the employers portion of payroll taxes.  Why should my client have to pay any employer's payroll tax for just passing tips through to his employees?  

But when tips are recorded on the sale receipt, they are collected in a liability account “Undistributed Tips”.  Using income and expense does not create any transaction that would clear that liability.

This is an old post, but I am still experiencing the same problem in QB Online. Is there a solution to Crediting Tips Payable via Payroll automatically?