Accounting for Credit Card Tips + easy vs right

ohio_bryce

I'm having trouble wrapping my head around something. Hoping y'all can help!

• I own a coffee shop and my baristas get tips from credit cards. I pay those tips from cash daily
• I have a payroll company that pulls payroll taxes out weekly and then pays them for me

To make my life realy simple, I'd love to have only a few accounts and sub-accounts:

• Gross Pay
• CC Tips
• Employer Taxes w/ the applicable sub accounts

Since the payroll company is holding the EE's taxes, I'd love to just pass on the extra entry of liability accounts for them.

Here's the problem... They make 4 withdrawals from my bank account.

• Direct deposits for payroll
• Federal tax
• State tax
• Local tax

I either need to delete those from my transactions (reconcile issues) or track the liabilities.

If I go the 2nd route, the direct deposit amount doesn't equal my actual wage expense. I'm assuming I'd need some adjusting entry somehow?

What's the best way to do this? (My goal is the simpliest way to get my bottom line right. Not as concerned about detailed reporting for these items.)

Thanks!
Bryce

AlexL

Hey @ohio_bryce , sorry for the late response on this one.

To start, I do want to let you know that Wave doesn't support sub-accounts so you'll want to keep this in mind while we discuss how to best handle your Payroll situation and the accounting associated with it.

When it comes to paying out tips, my understanding is that the taxation around tips is very specific based on where you're located, so much so that we as a Payroll company don't actually support it in our product. Because of this, I'd highly recommend that you reach out to a CPA/accountant about the best way to bookkeep these so that they can point you in the right direction.

Now, when discussing your Payroll transactions, I would recommend you take the liability route. This is actually how Wave handles its own Payroll accounting, and you can learn more about how this is bookkept through our Help Center article 'Wave Payroll: All about the bookkeeping' as you may want to follow these steps. I'm assuming that the direct deposit doesn't equate the actual wage expense as you have the other tax amounts being withheld by your Payroll company? Having a liability account that holds the liabilities until they're withdrawn from your account via the Payroll company should suffice, and this is also covered in the article. Again though, if you're having trouble with this process, I'd highly recommend reaching out to a CPA/accountant who can help you get straightened out.

Lastly, we do have our own in-house accounting service called Wave Advisors who would be able to help you if you needed it. You can book a free 15 minute consultation through the link provided above.