Employers don't withhold income tax, social security, and Medicare on allocated tips. For more information, visit the IRS page for Tips Recordkeeping & Reporting. 

Follow the three-steps below to process Allocated Tips for your employees.

1. Create an Other Pay for the Allocated Tips

1. Select PR, Utilities, Maintain Other Pays, then select New to create a new Other Pay.
2. Enter an ID, for example TIPS.
3. For the Method, select Variable, entered on time card.
4. For the Category, select Individual.
5. Clear the check boxes for all taxable fields and Add to Gross.
6. In the Active field, clear the 'Always' check box.
7. Enter From and to dates of 12/31 of the current year.
   
8. Select the W-2 button, and specify 'Box 8' in the Box number to use field.
9. Select Save.

2. Add the Other Pay to employee in Maintain Employees

1. Select PR, Employees, Maintain Employees.
2. Select the employee, then click the Other Pays button.
3. Add the other pay to each employee you’re reporting allocated tips.

3. Process the paycheck

1. Select PR, Processing, Time Card Entry.
2. In the Earnings field, select the Other pay for the Allocated Tips.
3. Enter the amount of the allocated tips in the Gross pay field.  
4. Save the timecard.
5. Select Payroll, Processing, Automatic Payroll Calculation and calculate the timecard.
6. Print the Payroll Register to verify accuracy.
7. The allocated tips entry will show as an Other pay on the employee's check stub. 
8. Browse to PR, Processing, Print Payroll Checks.
9. Use 12/31 as your Check Printing Date to match the Active date of your Other Pay.
10. Print the checks. 
     NOTE: The check prints as a $0.00 amount check. The Allocated Tips amount will show on the check stub.

Allocated tips vs. Social Security tips

• Social Security Tips are tips the employee has reported to their employer
• Allocated tips are amounts given to tipped employees in addition to the tips they report
• See Tips, Frequently Asked Questions from the IRS website