How to handle employee tips received via customer credit cards

The tip money belongs to the employees and so is a liability to you until you add it to their next payroll.

In this case,

- Set up one or more other charge items that use a liability account set up just to track the tips.  You may want to set up a different tips item for each tipped employee. This will help you create item-based reports later to determine the tips to pay.

- Then use the item(s) on sales for the tip amount.

- Then create an item-based report for the appropriate period (to capture previously un-reimbursed tips.) If you created an item per employee, that detail will show on the report.

- Create a Tips addition payroll item for these credit card based tips. Use the same liability account on the payroll item that you used on the sames item.

- Then use a Tips addition item to add the appropriate tips to the employee paychecks.

- After recording the paychecks, the liability account's balance will be reduced by the amount of tips on the payroll.  Use the payroll summary report or a custom report to verify that the CC tips paid are the same as the CC tips collected from the sales report.