Payroll

Pay tips and report tips and overtime on W-2s

Enter card and cash tips on a run, share a tip pool, and get the 2026 W-2 amounts for the no-tax-on-tips and overtime deductions right.

Needs a plan with Payroll (Starter and above).

Steps

1. For each tipped employee, open Manage users, the person, Payroll details, and under Tips and overtime turn on Receives tips and choose their tipped occupation. Without the occupation their tips can't be reported as qualified tips.
2. Mark salaried managers who are exempt from overtime there too, so their overtime isn't reported as qualified overtime.
3. On the hours step of Run payroll, open a person's amounts: card tips are paid through payroll, cash tips the employee kept are taxed but not paid again, and service charges are wages, not tips. Share a tip pool splits a total by hours, points or equally.
4. Where your state allows a tip credit, the run adds minimum wage make-up pay when cash wage plus tips falls short, and says so on the review.
5. Give each pre-tax deduction a type (401(k), health premium, HSA...). It decides Social Security and Medicare and the W-2 box.
6. Before W-2s go out, open Year-end: W-2s and tips to check box 12 TT (qualified overtime), TP (qualified tips) and box 14b, and the FICA tip credit estimate.