Here is what we are doing for our trade business, where per the IRS we can deduct tips. For what it's worth!!!

- On the 1065, line 1, show your total gross receipts.  Line 8 should show Total Income (include your tips in both of these).

line 21, show the tip deduction.  You may need to attach a sheet that states "Tips -- $$$$$"

- Then on line 23, your typical ordinary business income will show the deduction you took in line 21.

On the 1065, Schedule K:

- Line 1) Bring over the total from Line 23 above.

- Line 13) include tip income as deduction here.

- Line 14a) You cannot deduct the tips from here because you still have to report tips as part of SE earnings.

On the personal K-1:

Line 1) This should include the total for that partner, without the tips included here.

Line 13) Other Deductions.  You'll have to pick the proper letter code -- show the deduction here along with any other deductions.

Your Lines 14A and 20 should not change (SE Income and QBI if you have any).