Some employers may handle charge tips differently from cash tips. Employers must distribute employee tips paid by customer charge cards. You may want charge tips to be reported separately from cash tips to account for income the employer distributes to the employee.
Note: If you want charge tips to be reported separately, you must modify the tip reporting procedure.
Create two employee payroll fields
- Tips(a memo field)
- CCTips (a non-memo field—see below)
Tips, along with CCTips, must be included in the adjusted gross. If using both charge tips and cash tips, you must set up a third employee payroll field called W2Tips. The W2Tips payroll field will add the Tips and CCTips payroll fields together for W-2 purposes. Finally, you will associate Box 7 on the W-2 form with the new W2Tips payroll field.
Note: If you are going to separate the cash and charge tip payroll fields, we recommend that you enter this information at the beginning of the payroll tax year. This way the employee's W-2 form will accurately reflect the annual total of tip income (charge and cash). It is not recommended that you change the tip reporting procedures in the middle of the payroll tax year because the W-2 reporting will change (use a new field in Box 7) and not reflect an accurate annual tip income.
Setting up the charge tips payroll field
- Set up the cash tips and credit card tips employee payroll fields.
- Set up a formula that adds cash and charge tips together.
- Set up a combined tips employee payroll field and apply the total tips formula to it.
Note: You must subscribe to a plan that includes payroll to set up and use payroll formulas. If you do not subscribe, you can set up the payroll field, but you will have to manually calculate your payroll taxes and deductions. You also will not be able to print W-2s from within Sage 50.