Employees taxes higher than wages

[Abe4]

My servers are avg $75-$90/hr in credit card tips and are earning $15/hr in wage. I cash their tips out nightly. By the end of the payroll week when I process payroll on square, some of their taxes are higher than their hourly wage, which is causing my payroll issues.

What should I do? Make them take their credit card tips in their paycheck?

[MayaP]

Hi @Abe4 - I see this is your first post in the Seller Community, so I'd like to officially welcome you! 🎉👏

I would suggest speaking with our Payroll Team, but I also have tagged some of our super sellers who can assist @wajiha @homeprogreen @ryanwanner @Donnie-M @PartyManiaMD. You can reach Payroll at

1-855-700-6000, squ.re/contactsqsupport. I hope you are able to find a solution! If you have any other questions please let me know. 

[homeprogreen]

The only solution to this problem is to quit cashing them out every night. Not sure about the costs involved or your current payday schedule but what I would do is run a separate check run for tips on a weekly basis so that the correct taxes are withheld from the tips and it’s not messing up your payroll. Of course if you’re already doing a weekly payroll instead of a bi-weekly then there’s no need to run separate check for tips and I would just include them on the regular paycheck. They would still be getting any tips paid with cash every end of shift. Of course this will probably cause some grumbling since they’re used to nightly cash out but should only be a week until they start seeing those bigger checks and adjust. 

[Donnie-M]

@Abe4 Are you paying them 15$ an hour plus tips? or are you in a state where you can claim a tip credit?

This could greatly change how you want to handle the tips.  I would do weekly payroll with square payroll and then they can use cash app to get the advantage of being able to take some pay early.  Do your employees claim their cash tips?  The only other way to do this is to raise the pay in order to cover the taxes.  I am not sure if you can only let them cash out a portion of their tips on any given night.

An alternate plan would be to not allow any server to cash out on the first night they work, only the subsequent nights, and this should give you enough cushion to have it there for payroll.  It also incentivizes them to show up.

[ryanwanner]

@Abe4aaahhhhh.... the dreaded $0 paycheck because of tips. I remember it well. *shudder*

From what I can tell, the business ends up taking the loss for the difference between taxes and wages. The total amount of taxes due will not change regardless of how much the employee makes, which means it'll come out of your pocket.

I agree with your thought of putting the CC tips in the checks to make sure that doesn't happen. This is how I have my biz set up, and even with the wages set where yours are at, my team still gets sizable paychecks.

Thanks for the tag @MayaP !