Tip Reporting

General support regarding TimeTrex, such as
configuring policies/taxes or processing payroll.
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kateg
Posts: 1
Joined: Mon Dec 28, 2015 4:44 pm

Tip Reporting

Post by kateg »

Hi, I would like to start using TimeTrex for a restaurant but am having a hard time figuring out how to tax reported tips. Employees are paid biweekly (1-15 / 16-eom), but monthly I have employees hand in their form 4070 of monthly reported tips which I then record and deduct the necessary taxes from their paychecks. We do not hold or disburse any tips, employees receive them each shift (cash & credit card) and then report them.

I can see how to report tips by doing a pay stub amendment and this works for calculating the social security/medicare, however it then adds the reported tip to the paycheck, adjusting the gross payment. I've been able to add a deduction to take the tips received out of their net pay, however it requires an additional pay stub amendment, and because I am reporting tips monthly but wages bi-weekly the income tax withholding doesn't work out right. I think I may be approaching this the wrong way - wondering if other tip-reporting business have run into this and how they have solved it?

Thanks for the help
shaunw
Posts: 7839
Joined: Tue Sep 19, 2006 2:22 pm

Re: Tip Reporting

Post by shaunw »

If you make your "Tips" pay stub account a Miscellaneous type, it won't add or deduct it from the employees pay stub, just report on it. You can then include that pay stub account into the necessary Tax/Deduction records so its taxed as if its income. You would still add the tips to TimeTrex as pay stub amendments though of course.
josephrussell
Posts: 11
Joined: Tue Dec 29, 2015 12:26 pm
Location: Bellingham, WA
Contact:

Re: Tip Reporting

Post by josephrussell »

Thanks for the help Shaun. I'm working with Kate on the implementation. I was able to create the paystub account last night and then create a deduction to remove the income as it is already received by the employee. I'll try making the account misc. instead as that would flow better.

There is one more question however, Kate collects the servers tip reporting monthly, but we pay semi-monthly. We're concerned that the tax tables will be incorrect as the pay period on Timetrex is setup for semi-monthly, but mid month tips are 0 and end of the months are tips for the entire month. Is there a proper way to set this up so the tips are taxed based on a monthly pay period. Does it even matter?

Thanks,
Joe
shaunw
Posts: 7839
Joined: Tue Sep 19, 2006 2:22 pm

Re: Tip Reporting

Post by shaunw »

The tax formula states that the employees would have more taxes deducted on the pay stubs with tips than without, but depending on the size of the tips it may or may not make any material difference. Tax formulas in general are just estimates especially when the gross earnings for an employee fluctuates substantially, which handling tips on a monthly basis would definitely exasperate the problem.

If you go to Payroll -> Tax/Deductions, and edit the Federal & State income tax records, then change the "Formula Type" to "Always Special". This will switch the tax formulas to a non-standard cumulative averaging formula that better estimates employees earnings when they fluctuate substantially, though it does have its drawbacks when it comes to tax changes (such as marital status or allowances changing mid-year). There is no perfect solution necessarily, but that is probably your best bet at this point.
josephrussell
Posts: 11
Joined: Tue Dec 29, 2015 12:26 pm
Location: Bellingham, WA
Contact:

Re: Tip Reporting

Post by josephrussell »

Thanks Shaun. I told Kate we should just start collecting tip reports semi-monthly, same as the pay period. I appreciate the help.

Joe
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