How to Report Tips in QuickBooks

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The Internal Revenue Services requires that all businesses and individuals report income received throughout the year on an income tax return. You can use your Quickbooks software to report tipped income of yourself and your employees. You will need separate payroll forms to report tips retained by employees versus tips you collect and add to the employee’s paycheck. In order to take advantage of the tip reporting feature, you will need Quickbooks Premiere Pro.

Tips Retained by Employee

Create a payroll deduction item for the tips retained by the employee. Click “Lists” then the “Payroll Item List” at the bottom of your Quickbooks screen window.

Select the “Payroll Item” button. A drop-down menu will appear. Click “New.”

Click “Custom Setup” then “Next” at the bottom of the dialog box. Follow the prompts to select retained tips as compensation type and then input employee tip compensation. Click “Finish” once all tips have been entered.

Employees Receive Tips on Paycheck

Create an addition payroll item for the taxable tips turned in to you. Go to the "Lists" menu in the main menu bar and click “Payroll Item List.”

Click the “Payroll Item” button and then click “New.”

Choose “EZ Setup” then click “Next.” On the second page of the dialog box, you have the option to choose the payroll item you want to add. Choose “Compensation.”

Check the box labeled “Tips” under Other Compensation then click “Next.” Check the box labeled “Reported Paycheck Tips” then click “Next.” Click “Finish.”


About the Author

Lanae Carr has been an entertainment and lifestyle writer since 2002. She began as a staff writer for the entertainment section of the "Emory Wheel" and she writes for various magazines and e-newsletters related to marketing and entertainment. Carr graduated from Emory University with a bachelor's degree in film studies and English.

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