How to Accurately Track and Tax Tips Across Multiple Channels

Question

How can I comply with tax regulations while accurately tracking and distributing tips from various sources for payroll processing?

Answer

To ensure accurate taxation and payment of tips, you need to include all relevant tip types in your Tip Calculation during payroll processing. Here's a breakdown of how to handle different tip types:Tip Calculation.

Tip Types to Include in Your Tip Calculation

• Cash Tips: Tips paid directly to employees in cash.
• Tip Payouts: Tips distributed to employees at the end of a shift via 7shifts Tip Payouts.
• Tip Pool Amounts: Shared tips that are pooled among employees via 7shifts Tip Pooling.
• Declared Tips: Tips employees report receiving directly (often in the POS or Time Clocking system).
• Credit Card Tips: Tips received through card transactions.
• Auto-Gratuities: Service charges or mandatory gratuities.

Steps to Set Up Tip Calculation

1. Add tips that need to be distributed to employees via paychecks under the Deductions section of your Tip Calculation.
2. Record tips already paid to employees (e.g., cash tips or tip payouts) under the Paid section.
   • Learn more about configuring your Tip Calculation here.