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How allocated tips are calculated in EasyACCT

by Intuit EasyACCT 2023 Updated 7 months ago

Income tax, social security and Medicare taxes are not withheld on allocated tips. For more information, visit the IRS page for Tip Recordkeeping & Reporting.

Allocated tips are calculated using the Hours Method outlined in Circular E.

  1. Total Amount to Allocate = Gross Receipts X a % (typically 8%)
  2. Number of Hours = Regular Hours + (Overtime Hours X Overtime Rate Factor)
  3. Employee's Share = Total amount to allocate X (Number of hours employee worked/Total hours worked by all employees)
  4. Employee's Allocation = Employee's share - Reported Tips

Make sure the following steps are completed so tips are calculated correctly:

  1. Go to Batch Payroll, scroll down to Update Company Files, and select Company Information.
  2. Switch to the Default Payroll tab and select the box Compute Allocated tips using hours.
  3. Got to the Main tab > Company Information screen, and enter the Minimum Wage Amount.
  4. Go to the Employee Information screen, choose an employee, and select Edit Record.
  5. Make sure the tipped employees are set up as hourly.

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