Detailer Tip Handling

Make sure every customer tip for detail work is recorded the same way, lands in the right place in Tekmetric and QBO, is taxed correctly, and is paid out on the detailer’s W-2 paycheck — never as cash and never as a side check.

1. Rule of the house

• Tips are paid only through QBO Payroll on the detailer’s regular paycheck.
• Never hand cash, never write a separate “tip check,” never treat the tip as a shop bonus outside payroll.
• A customer-chosen tip is a voluntary tip, not a mandatory service charge. That distinction matters for tax reporting and the employee’s qualified-tips deduction.
• The shop holds the money in Tips Payable until payday. It is not shop income.

2. When a customer tips on an RO

This applies any time a customer adds a tip for detail work — card, cash handed to the advisor, or written on the RO.

• Advisor adds a line item to the RO named Tip / Gratuity for the exact dollar amount.
• That line is mapped to the Tip fee (Section 3). Never add it as labor or parts. Never mark it taxable.
• Note the detailer’s name in the RO notes if it is not already obvious from the job.
• Customer pays the full RO total as one payment. No separate transaction for the tip.
• Advisor logs the tip the same day on the running tip log (Section 6).

3. Recording the tip in Tekmetric

One-time setup

• Shop Settings → RO Settings → Fees → create a fee named Tip / Gratuity.
• Set it as a flat / variable amount (not a percentage) so the amount can be typed in per RO.
• Mark it non-taxable.

Confirm the exact menu path with your Tekmetric rep before rolling this out shop-wide. Fee settings can vary by plan.

Per RO

• Add the Tip / Gratuity fee with the customer’s exact amount.
• Confirm the assigned detailer is on the RO.

4. Recording the tip in QBO

One-time setup

• Chart of Accounts → New → Account type: Other Current Liabilities → Name: Tips Payable.
• Products and Services → New → Service → Name: Tips / Gratuity → Income account: Tips Payable (the liability account, not an income account) → Non-taxable.

Per invoice (Tekmetric is not synced to QBO)

• When entering the RO into QBO, add a line for Tips / Gratuity for the same amount as the RO.
• Receive the full payment against the invoice as usual. QBO routes the tip portion to Tips Payable and the rest to normal income.

5. Paying the W-2 detailer

This is the only approved payout method.

One-time employee setup in QBO Payroll

• Open the employee → Pay types → enable Paycheck Tips (the qualified tip pay type — not “Non-qualified”).
• Assign Treasury Tipped Occupation Code (TTOC) 805 — Personal Vehicle and Equipment Cleaners (covers auto detailer). Required for 2026 W-2 Box 14b.
• Leave Cash Tips off unless he actually pockets cash on the floor. In this shop, charged and advisor-collected tips are Paycheck Tips.

Each pay period

1. Pull the tip log and the Tekmetric Fees report for that pay period.
2. Confirm the total matches Tips Payable in QBO. Fix mismatches before payroll runs.
3. On his paycheck, enter the period tip total in Paycheck Tips.
4. Run payroll. QBO withholds employee FICA (7.65%) and federal income tax, posts the employer FICA match (7.65%), and reports the tips on the W-2.
5. Confirm Tips Payable returns to zero (or to only unpaid tips still inside the next open period).

6. What the paycheck and W-2 should show

Qualified tips (voluntary customer tips in a listed occupation) may be deducted by the employee up to $25,000 on the federal return for tax years 2025–2028, subject to income phaseouts. Correct payroll reporting is what documents that deduction. Mandatory service charges do not qualify.

7. Recordkeeping

Keep a running log so tips can be checked against Tekmetric and QBO at any time:

Reconcile this log against the Tekmetric Fees report and the QBO Tips Payable balance before every payroll. Catch mismatches before the check is cut, not after.

8. What not to do

• Do not pay tips in cash from the drawer.
• Do not write a separate vendor check or “bonus” check outside payroll.
• Do not code the tip as labor, parts, or shop income.
• Do not mark the tip taxable on the RO.
• Do not skip the log because “it was only $20.”
• Do not use Non-qualified Tip pay types for customer-chosen tips.

9. Who does what

SOP-TIP-W2-001 · Valued Auto Car · Owner: Office / Payroll · Review monthly + year-end.