Hi @Lynn_TRU. Do your employees get a paycheck, or are they volunteers? If they are on the payroll, you can just add that to their paycheck as a “bonus” and that will keep everyone legal. If you want to give them them the cash now, you can still add it to their paycheck as a “bonus” as well as an “advance” so that they aren’t paid twice.
If you were a for-profit business, you might have to worry about the fact that these card “tips” are taxable, but in your case that doesn’t matter, so don’t sweat it. Of course, since the tip was put on a card, you will be out the card processing fees. It would be up to you whether or not your employees had to eat that.
If you only have volunteers without payroll, just give them cash or write a check for the amount. You’ll need to have them sign something for your accountant to do the proper bookkeeping entries. Also, as your accountant will tell you, if your volunteers get more than $600 per year (as of 2023) in these tips, you’ll need to issue them a 1099 at the end of the year.
Just talk to whoever does your books and files your tax returns. They’ll know exactly how they want you to handle it. This is the kind of thing that is really outside of Square’s wheelhouse.
Chip A.
Square Expert & Innovator and member of the Square Champions group. (But NOT a Square employee, just a seller like you)
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