Maybe the question I should be asking is whether the tips should appear in wages expense at all. They technically aren't an expense. They're collected from customers, held in the liability account and then paid to employees. Prior to accepting tips, we always ensured that our financial reports showed the same wages and payroll tax reported to the IRS because we heard its an audit flag if they differ. However, in the case of businesses that collect tips, is that necessarily true. My financials would show less of a wage expense than reported, so maybe I'm overthinking this? Again, thanks for your time.
