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Administrator Guide
Last Updated: 2023-06-23
Concept: Tip Wages and Taxes (USA)

Concept: Tip Wages and Taxes (USA)

Employees can receive cash tips from customers, which they then report to you for taxation. They can also receive tips through you, such as pooled tips or tips added to credit card payments. You can pay tips to employees along with an on-cycle payroll. Workday processes both employee-reported and employer-controlled tips for tax reporting.
Tip Earnings
Create 2 earnings to accommodate these situations:
  • Employee-reported tips.
  • Employer-controlled tips.
Workday doesn't calculate tips as supplemental earnings.
Tip Tax Deductions
Add these State Withholding Tip Tax deductions using the
Maintain Deduction Priorities
 task to properly process state tip taxes:
  • State Withholding Tip Tax (Resident) [USA]
  • State Withholding Tip Tax (Work) [USA]
  • Local County Withholding Tip Tax (Resident) [USA]
  • Local County Withholding Tip Tax (Work) [USA]
Tips and Tip Taxes in Payroll Results
When you run a pay calculation for an employee, the administrative payroll results display:
  • The employer-controlled tip wages and associated taxes on the
    Gross to Net
     tab in the
    Others
     section.
  • The employee-reported tip wages and associated deductions on the
    Additional Pay Components
     tab in the
    Others
     section.
When configured, the payslip displays:
  • Employee-reported wages as
    OASDI Tip Tax [USA] - Taxable Wages
    .
  • Employer-controlled wages and taxes aggregated with other compensation, such as base pay.
Payslips display OASDI wages separately from OASDI tip wages so the employee can tie their payslip to their W-2 form. The payslip aggregates taxes, but displays these OASDI regular wages and tip wages separately:
  • OASDI [USA] - Taxable Wages
  • OASDI Tip Tax [USA] - Taxable Wages
Wages:
  • Federal Withholding - Taxable Wages [USA]
     = federal + federal tip wages
  • Medicare - Taxable Wages [USA]
     = Medicare + Medicare tip wages
  • OASDI [USA] - Taxable Wages
  • OASDI Tip Tax [USA] - Taxable Wages
Taxes:
  • Federal Withholding [USA]
     = Federal + Federal Tip Tax
  • Medicare [USA]
     = Medicare + Medicare Tip Tax
  • OASDI [USA]
     = OASDI + OASDI Tip Tax
  • State Withholding Tip Tax (Resident) [USA]
  • State Withholding Tip Tax (Work) [USA]
  • County Withholding Tip Tax (Resident) [USA]
  • County Withholding Tip Tax (Work) [USA]
Reports and Web Services
Except for OASDI, Workday combines all taxes and wages in reports and web services.