Tips Reported to employer by employee for payroll tax purposes

[duanecpa]

Employee reports tips received from customers to employer for payroll tax purposes - the same tips are added for payroll tax purposes and then subtracted on the same payroll check so the employee does not get paid the tips again.

W-3 Box 1 includes tips
Box 3 does not include tips
Box 5 includes tips

QB shows as payroll expenses the amounts actually paid by the employer and does not include the tips reported for payroll tax purposes = this QB payroll amount also equals Box 3 on the Form W-3.

On the employer's business tax return, what amount is deductible? the amount actually paid by the employer to the employees which = QB payroll expense which = Box 3 of Form W-3?

Or Box 1/Box 5 which includes the amounts paid by the employer + tips reported by employees paid by the customers to the employee?

Example: QB Payroll Expense = $138,000 = Box 3 of Form W-3
Tips reported to the employer by the employees for payroll tax purposes only = $7,000

Box 1 = Box 5 = $138,000 + $7,000 = $145,000

Which is the correct number to deduct on the employer's business tax return? $138,000 or $145,000?

Thank you in advance.

[TAXNJ]

Don't know....

who QB is but either try payroll software or do it manually or see if the following addresses your issue.

https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting

[duanecpa]

QB = quickbooks

But the question is does the deduction on the owner's business tax return include the tips reported to the employer by the employees or not include the tips reported to the employer for payroll tax purposes. In the example, the employer paid $138,000 out of their own pocket - is this the amount that is deductible on the owners business tax return? or is the deduction on the owners business tax return $145,000 including the tips of $7,000 which were paid to the employees and reported to the employer for payroll tax purposes?

Thank you.

[kathyc2]

How is the 7K an expense of the business? If you debit payroll expense by 7K, you would also need to credit a p/l account to keep the bottom line true.

It's doubtful that all or even a majority of the tips are cash paid by patrons to waitstaff. I would guess a large portion are added to credit or debit card so the company received the cash. How do they post these transactions?

I think you need to delve a little further in how they record QB data to get a good understanding of what they are doing.