Set up qualified tips

The setup process for qualified tips must be completed for all employers by August 30th, 2026.

To support qualified tips, part of the One Big Beautiful Bill Act, each employee must have at least one Traditionally Tipped Occupation Code (TTOC) assigned. At least one tipped pay type must be marked as Include in Qualified Tips.

Set TTOCs for employees and contractors

To set the TTOCs for an employee or contractor:

  1. Go to Employees, then select Employment.

  2. Select at least one TTOC. Up to two TTOCs can be selected for each employee or contractor.

The full IRS list of traditionally tipped occupations is available in Forms and Pubs in Resources. It provides more detail and examples than the TTOC options.

Find tipped pay types

To find and review pay types:

  1. Go to Employer Setup, then select Pay Types.

  2. Review all with Pay Type set as Cash Tips or Paycheck Tips.

    Non-EE Cash Tips and Non-EE Paycheck types are coming soon and will also need to be checked.

  3. For each pay type to include in the qualified tips calculation, select Include in Qualified Tips.

    If a Pay Type is a qualified tip for one employee, the same pay type cannot be used as a non-qualified tip for another employee. A separate Pay Type must be created for that. When creating Pay Types for tips, we recommend entering Sequence numbers that keep them grouped together.

Qualified tips must be voluntary cash or equivalents of cash tips received by employees in occupations that customarily and regularly receive tips. Qualified tips do not include any fees automatically applied by the employer, such as automatic gratuities, service charges, table charges, bottle charges.

How qualified tips are calculated

On or shortly after September, 1 2026, Payroll Relief checks to retroactively calculate the total of qualifying tip pay types for all employees and contractors with at least one TTOC assigned.

For payrolls entered after setup is complete, qualified tips are calculated automatically. It totals all Pay Types selected as Include in Qualified Tips for each employee with at least one TTOC set.

Payroll entry

A new information column displays on the Payroll Entry. No additional data needs to be entered. The values in this column do not affect the employee's paycheck.

Reports

An Employee Tips and Qualified Tips report is coming soon.