Payroll Item

• Set up allocated tips as a payroll item. However, unlike regular payroll items, allocated tips do not create a payroll liability; your company does not owe tips in the same way that it owes regular payroll. Thus, when you set up the item in Quickbooks, you must use the same account as the liability account and the expense account when setting up the item.
  
  

Company Contribution

• Allocated tips are considered a company contribution, or benefit of working for the company. To set up a company contribution of any sort in Quickbooks, set up a new payroll item. Mark the item as a company contribution and follow the on-screen instructions to set up the payroll item. When you do your payroll, enter the allocated tips amount to track how many tips you are paying to each employee.
  
  

Assigning Allocated Tips

• You can assign allocated tips to each employee in one of two ways. You may enter the allocated tips amount as a positive liability against your allocated tips payroll item or add the allocated tips payroll item or amount to the employee's regular paycheck. Once you have assigned allocated tips, send the payroll to Quickbooks Payroll Assistant so that you can cut paychecks for each employee who includes her allocated tips.
  
  

W2s

• At the end of the year, you must report allocated tips that you paid to each employee on the employee's W2. You can easily print W2 forms from Quickbooks by going to "Payroll Center" and choose "Federal Forms." Choose "Annual W2" and highlight the names of employees. The form will print automatically with the employee's allocated tips as well as his wages for the year.