Solved: paying out credit card tips

Etemple · ‎03-30-2021

If my employees want their credit card tips converted to cash, can I pay them out what their credit tips are for that day/ week in cash?

(When i worked as a waitress, we would gather all our CC slips, enter the tip totals in the POS after our shift, and at the end of the night the mgr, would "cash us out" by giving us our CC tips.) (and they discreetly took the 2% CC processing fees out of that total).

I own a spa, but employees want to know if they can get their tips in cash-just like at a restaurant. How do I this??

Donnie-M · ‎03-31-2021

@Etemple This is really dependent on how you want to do the accounting part of this. Cashing out tips is pretty common in the business. The big thing with cashing out your employees is to make sure to keep accounting for IRS reporting purposes for income for your employees. You also have to withhold the appropriate amount of taxes etc. for the tips from each of their regular paychecks.

According to the IRS, "Employers are required to retain employee tip reports. Employers are also required to withhold taxes (including income taxes and the employee’s share of social security tax and Medicare tax) based upon wages and tip income received by the employee and to deposit this tax. In addition, employers are required to pay the employer share of social security and Medicare taxes based on the total wages paid to tipped employees as well as the reported tip income. This information and tax is finally reported to the IRS on the appropriate forms by the employer."

As the owner, you want to have those reports so the cash you pay out daily is not counted as income for your business. Your state laws may also vary and have different requirements, so always check with your CPA or Attorney for legal or tax advice. If you are using device codes with square and having each employee have their own id it will be easier to track and run a report for your payroll, etc. I would really look at using team management and even payroll from square to simplify your life in this aspect so you don't waste a ton of time messing with the recordkeeping and payroll. You can then focus on growing your business or providing services that make you money. Unfortunately, in business doing payroll, taxes, and accounting do not "make" you any money.

Hope this helps,

Donnie

Donnie
Multi-Unit Manager
Order Up Cafe/Tombras Cafe/Riverview Cafe/City County Cafe
Roddy Vending Company, Inc.
www.OrderUpCafe.com

Using Square since July, 2017
Square Super Seller
Square Beta Team

"Good judgment comes from experience, and experience comes from bad judgment."

"You can have everything in life you want, if you will just help other people get what they want." Z.Z.
Do you want to have great restaurant menus that are easy to edit and don't cost a fortune? I use MustHaveMenus and you can too!
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Donnie-M · ‎03-31-2021

@Etemple This is really dependent on how you want to do the accounting part of this. Cashing out tips is pretty common in the business. The big thing with cashing out your employees is to make sure to keep accounting for IRS reporting purposes for income for your employees. You also have to withhold the appropriate amount of taxes etc. for the tips from each of their regular paychecks.

According to the IRS, "Employers are required to retain employee tip reports. Employers are also required to withhold taxes (including income taxes and the employee’s share of social security tax and Medicare tax) based upon wages and tip income received by the employee and to deposit this tax. In addition, employers are required to pay the employer share of social security and Medicare taxes based on the total wages paid to tipped employees as well as the reported tip income. This information and tax is finally reported to the IRS on the appropriate forms by the employer."

As the owner, you want to have those reports so the cash you pay out daily is not counted as income for your business. Your state laws may also vary and have different requirements, so always check with your CPA or Attorney for legal or tax advice. If you are using device codes with square and having each employee have their own id it will be easier to track and run a report for your payroll, etc. I would really look at using team management and even payroll from square to simplify your life in this aspect so you don't waste a ton of time messing with the recordkeeping and payroll. You can then focus on growing your business or providing services that make you money. Unfortunately, in business doing payroll, taxes, and accounting do not "make" you any money.

Hope this helps,

Donnie

Donnie
Multi-Unit Manager
Order Up Cafe/Tombras Cafe/Riverview Cafe/City County Cafe
Roddy Vending Company, Inc.
www.OrderUpCafe.com

Using Square since July, 2017
Square Super Seller
Square Beta Team

"Good judgment comes from experience, and experience comes from bad judgment."

"You can have everything in life you want, if you will just help other people get what they want." Z.Z.
Do you want to have great restaurant menus that are easy to edit and don't cost a fortune? I use MustHaveMenus and you can too!
MustHaveMenus

teresalmorton · ‎06-05-2021

Is there a tip out feature in Square that can help track it? Or is it all a manual process.

Or is there a subscription version of Square that I can use that has that option?

Thanks

Donnie-M · ‎06-06-2021

@teresalmorton I know if you use square payroll they can import and keep track of everything for you. They even have tip pooling etc.

Donnie
Multi-Unit Manager
Order Up Cafe/Tombras Cafe/Riverview Cafe/City County Cafe
Roddy Vending Company, Inc.
www.OrderUpCafe.com

Using Square since July, 2017
Square Super Seller
Square Beta Team

"Good judgment comes from experience, and experience comes from bad judgment."

"You can have everything in life you want, if you will just help other people get what they want." Z.Z.
Do you want to have great restaurant menus that are easy to edit and don't cost a fortune? I use MustHaveMenus and you can too!
MustHaveMenus

thebuff5 · ‎04-30-2023

How does Square reimburse employers for cashing out tips on credit card slips? I have been paying close attention to my daily and weekly deposits from Square and I am not seeing where they have reimbursed me for the tips I have cashed out on credit card slips.

_Violet · ‎05-02-2023

Hi @thebuff5 - I see this is your first post in the Seller Community so I'd like to officially welcome you! 🎉👏

As @Donnie-M mentioned, you can use Square Payroll to automate the process of calculating tips and importing them into Payroll.

Are you currently using anything to track your credit card tips? Or are you taking cash out of the register to cover credit card tips and distributing the cash to your staff?

I'll keep an eye out for your reply! 👀

Violet
Community Moderator, Square
Sign in and click Mark as Best Answer if my reply answers your question.

thebuff5 · ‎05-07-2023

I cash my employees credit card slip tips out at the end of their shift and keep track of them on a spread sheet which goes to my accountant for payroll. My question is, how do I get reimbursed for those tips, from Square. I grossed over 4800. last weekend, with over 800. cashed out in tips. My weekend deposit was just over 2200. so I was just wondering why I didn't get reimbursed for the tips which would have been paid from the credit card slips? and why my deposit was so much lower than my credit card purchases? I will be checking this same transaction on Monday to see what kind of difference there is in this weeks deposits.

Kassi_ · ‎05-09-2023

Hey there, @thebuff5 -

There wouldn't be a reimbursement for the tips you have used cash to pay your employees. Any tip on your transactions would be added to the transfers for that particular day.

When it comes to weekend transfers, they are all sent together the following business day (usually early Monday morning). If you have any transactions that are made after your close of day, then those would sent after.

There are a couple of things that could be throwing off the total you're looking at - take into account all of the card transaction fees and any cash payments would not come through the transfer.

Please let me know if you have any other questions.

Kassi
Community Moderator, Square
Sign in and click Mark as Best Answer if my reply answers your question.

thebuff5 · ‎05-22-2023

So how much are the card transaction fees? Because this week I am over $600.00 difference between credit card totals plus tips and my deposit that went into my account. $600.00 doesn't seem like much to some companies, but to a very small business it is a huge difference. Am I paying over $600 in two days, for credit card fees?

Kassi_ · ‎05-23-2023

The transaction fees would not change on these types of transactions, @thebuff5. They would be collected on the total amount charged, so that would include any tips or sales taxes.

Kassi
Community Moderator, Square
Sign in and click Mark as Best Answer if my reply answers your question.

Mamasmahlzeit · ‎09-25-2023

I am having the same problem. I haven't seen the Tips back that I cash out to my waitresses after their shift.

Donnie-M · ‎09-27-2023

@Mamasmahlzeit Your deposit should match up (less fees) to your credit cards collected. You are essentially taking money from the cash collected to compensate for the credit card tips. The tips are already the property of the employees that earned them so if you didn't pay out the cash each night, you would be taking the money out of the credit card receipts at the end of the week from your deposits and paying them.

I find it much cleaner to pay the receipt tips out on payroll weekly or biweekly so you can deduct the proper taxes etc. Otherwise at the end of the year you could end up paying on those as income.

Donnie
Multi-Unit Manager
Order Up Cafe/Tombras Cafe/Riverview Cafe/City County Cafe
Roddy Vending Company, Inc.
www.OrderUpCafe.com

Using Square since July, 2017
Square Super Seller
Square Beta Team

"Good judgment comes from experience, and experience comes from bad judgment."

"You can have everything in life you want, if you will just help other people get what they want." Z.Z.
Do you want to have great restaurant menus that are easy to edit and don't cost a fortune? I use MustHaveMenus and you can too!
MustHaveMenus

Spurs · ‎03-06-2022

I had a gentlemen tip one of my employees $400. but the POS would not allow the employee to adjust that $400 for a tip... What the heck shall i do

Arie · ‎03-07-2022

Hey @Spurs,

Sorry to hear you're having trouble with tipping - have you checked out our guide on getting started with tipping yet? Looking forward to hearing back from you!