Which Line on 1120-S Tax Return to Deduct Tips Expense?

[jeffreyeng]

Hi,

I have a restaurant client that recieves a Form 1099-K and files an annual Form 1120-S. For the return, I have the Line 1 gross receipts or sales match the Form 1099-K amount then treat the tips as an expense. Has the IRS specified which line on the return to put the tips expense under? Under the Salaries and Wages Line (Line 8), under the Other Deductions Line (Line 20), or deducted another way?

[Terry53029]

Tips should be on employee's W2

[Terry53029 · Accepted solution]

Tips should be reported on the employees W2, and deducted  as wages

[sjrcpa]

Jeffrey is saying tips are in the 1099-K (ones put on credit cards) as income. 

If you're including them in income on the 1120-S, I'd put them on Other Deductions line since they are already included in W-2s. 

[George4Tacks]

Sue said "If you're including them in income on the 1120-S, I'd put them on Other Deductions line since they are already included in W-2s."

George may have not had enough coffee yet this morning, but if they are already included in wages, doesn't that deduct them? Putting them as an Other Deduction would then deduct them again. 

Please be kind, it is early. 

[judys3]

You would add a new expense category for "tipped wages".  This is a very gray area still.

I personally do not think tips should be included on the 1099-K.  You are not reporting them in any sales tax reports reported to the state so why should they be reported on the 1099-K

[sjrcpa]

@George4Tacks 

OP is going to report 1099-K amount as Gross Sales on 1120S. It is more than actual Gross Sales due to tip receipts being reported on 1099-K. He wants a deduction so as to not report too much income.

[judys3]

Yes sir correct.  I just wish since tips are an add on item on the receipts that it would not be reported on the 1099-K.  Those tips are not reported in gross sales on the sales tax reports so why would they be reported on the 1099-K

[jeffreyeng]

Yes, I agree with you. I believe that tips and sales tax should not be included on the 1099-K as well since sales tax and tips technically should not be deducted on the returns and like you said, they are not included anywhere on the state sales tax returns. But since sales tax and tips are included on the 1099-K, then they need to be deducted on the return.