A sit-down restaurant lives inside tipped-server math. One server tips out a busser, a bartender, and a runner off the same check. A six-top’s auto-gratuity is a wage, not a tip, so it lands in the overtime rate. A server who hosts on Thursdays is two jobs for the tip credit. And the FICA tip credit that hands the money back sits unclaimed because nobody kept the records. WageTime runs the tip-out pool inside payroll, treats a service charge as the wage it is, blends overtime across two roles, and keeps the tip records the Form 8846 credit is built from.
None of these is a back-office edge case. They’re the standing conditions of paying tipped servers in a table-service house, and each one is either a manager’s clipboard math or a credit you’re owed and never take.
A server tips out the busser, the bartender, and the food runner off one night’s tips, at a different percentage for each. Do it on paper and the pool is a shoebox of index cards; do it wrong and you’ve put a manager in a credit-taking pool, which the FLSA flatly bars.
An automatic gratuity added to a large party is a service charge, not a tip. That flips the payroll treatment: it’s a wage, it rides in the overtime regular rate, and it’s off both the FICA tip credit and “no tax on tips.” Book it as a tip and the overtime math is wrong.
The 80/20/30 side-work rule was struck down in 2024, so there’s no federal stopwatch on rolling silverware anymore. But a server who also hosts or preps is a separate occupation for the tip credit, some states kept their own limits, and payroll still has to split the hours.
The §45B credit hands back the 7.65% FICA you paid on servers’ tips above a floor frozen at $5.15 an hour. It scales with how heavily your servers are tipped, which makes it real money in a table-service house, and it goes unclaimed every year because the per-employee tip records aren’t clean.
Tipped overtime is figured on the full minimum wage, never the $2.13 cash wage, and a slow week that leaves tips plus cash under minimum owes a top-up. Both are easy to get wrong by hand, and food service is one of the DOL’s most-investigated industries.
Starting with 2026 W-2s, qualified tips get reported separately with a Treasury occupation code, and your servers can deduct up to $25,000 of them. A table-service house carries a heavy tipped-W-2 count, so the new form lands here first.
The tip-out, the service charge, and the credit each get a product screen or a straight answer below.
WageTime runs the tip-out as a pool structure inside payroll, so one server’s tips split to the busser, bartender, and runner at the percentages your house sets, and every share lands on the right check with the right taxes. Tip earning codes carry reported tips into the run, and top-ups are computed by state when a slow week leaves cash wage plus tips under the minimum. The rule the structure has to respect: when you take a tip credit, only customarily tipped roles can share a mandatory pool, and managers, supervisors, and owners never can. Back-of-house joins a pool only when you take no credit and everyone earns full cash minimum. You set the split; the pool balances to zero and posts.
| Employee | Role | Tips reported | Tip-out | Net tips |
|---|---|---|---|---|
| Maya R. | Server | $612.40 | -$153.10 | $459.30 |
| Rob K. | Server | $548.00 | -$137.00 | $411.00 |
| Diego M. | Busser | - | +$116.04 | $116.04 |
| Sara L. | Bartender | - | +$116.04 | $116.04 |
| Theo P. | Food runner | - | +$58.02 | $58.02 |
Replaces the shoebox of tip-out cards and the pool math a closing manager does at midnight.
A large-party automatic gratuity is a service charge, not a tip, so WageTime carries it as a wage pay code rather than a tip earning code, which is exactly what the IRS treatment requires. Distributed to your staff, that service charge is a regular wage: income and FICA tax withheld, and, because it’s wages, it folds into the weighted-average regular rate that overtime is figured on. It’s also excluded from the FICA tip credit and from the no-tax-on-tips deduction, both of which apply only to actual tips. Booking the six-top’s 20% as a tip instead of a service charge understates the overtime rate and overstates the credit. WageTime keeps the two codes distinct so the run is right.
| Employee | Role | Party charge | Payroll treatment |
|---|---|---|---|
| Maya R. | Server | $84.00 | Wages, in OT rate |
| Rob K. | Server | $84.00 | Wages, in OT rate |
| Diego M. | Busser | $42.00 | Wages, in OT rate |
| Sara L. | Bartender | $42.00 | Wages, in OT rate |
Replaces the auto-gratuity someone booked as a tip, and the overtime rate that came out low because of it.
WageTime tracks hours by role, so a server’s tipped shifts and a separate non-tipped role stay split for both the tip credit and overtime. Since the Fifth Circuit struck down the 80/20/30 rule in 2024 and the DOL restored the older dual-jobs rule, there’s no federal minute cap on a server’s side work: rolling silverware and station setup are part of the tipped occupation. What still matters is a genuinely separate occupation. A server who also hosts or preps is working two jobs, the tip credit applies only to the tipped hours, and when the week crosses 40 hours overtime computes on the weighted-average rate across both. Some states kept their own side-work limits, so the hours stay worth tracking.
| Day | Role | Hours | Tip credit |
|---|---|---|---|
| Mon dinner | Server | 6.0 | Yes, tipped |
| Tue dinner | Server | 6.5 | Yes, tipped |
| Wed setup & silverware | Server side work | 2.0 | Yes, same job |
| Thu lunch | Host | 8.0 | No, separate job |
| Fri dinner | Server | 6.5 | Yes, tipped |
Replaces the guess about which server hours the tip credit covers, and the flat overtime rate that ignores the second role.
WageTime keeps the per-employee tip records the §45B FICA tip credit is built from, and pulls them into one worksheet you hand your accountant. The credit returns the employer’s 7.65% Social Security and Medicare tax on servers’ tips above a wage floor frozen at $5.15 an hour, claimed on IRS Form 8846. In a table-service house where servers are tipped heavily, that’s real money, and it’s the credit small operators skip most often because the tip records were never clean. Distributed service charges don’t count, since they’re wages, not tips, which is one more reason to keep the two straight. WageTime keeps the records and the report; you or your accountant file the 8846.
| Employee | Tips reported | Above $5.15 floor | On the worksheet |
|---|---|---|---|
| Maya R. | $7,840 | $6,120 | Included |
| Rob K. | $6,910 | $5,300 | Included |
| Diego M. pooled | $2,140 | $980 | Included |
Replaces the FICA tip credit left unclaimed every year because the tip records lived on paper.
WageTime’s year-end W-2s are included and carry the new qualified-tip reporting, so the change that lands hardest on a table-service crew is handled where the tips already live. Starting with 2026 W-2s, employers report qualified tips separately, with a Treasury tipped-occupation code, because employees can deduct up to $25,000 of qualified tips on their returns for tax years 2025 through 2028. Social Security and Medicare still apply to those tips, and the deduction phases out at higher incomes. A sit-down restaurant carries a heavy count of tipped W-2s, so tip earning codes that tag qualified tips through the year are what make the January form come out right. Bring your reporting questions to the demo.
| Employee | Occupation code | Qualified tips | W-2 status |
|---|---|---|---|
| Maya R. | Waitstaff | $31,240 | Reported |
| Rob K. | Waitstaff | $27,600 | Reported |
| Sara L. | Bartender | $22,180 | Reported |
| Diego M. | Busser | $9,420 | Reported |
Replaces the year-end scramble to reconstruct which dollars were tips, on a form that now asks the question directly.
A tip-out runs as a pool structure inside payroll: one server’s tips split to the busser, bartender, and food runner at the percentages you set, and each share posts on the right check. Tip earning codes carry reported tips into the run. When you take a tip credit, only customarily tipped roles can be in a mandatory pool, and managers and owners never can. Bring your split to the demo.
A large-party automatic gratuity is a service charge, not a tip, so it’s taxed as regular wages: income and FICA withheld, and it folds into the overtime regular rate. That keeps it out of the FICA tip credit and the no-tax-on-tips deduction, which apply only to actual tips. WageTime carries a service charge as a wage pay code, separate from tip earning codes, so the run is right.
The 80/20/30 rule was struck down in 2024 and the DOL restored the older dual-jobs rule, so there’s no federal minute cap on a server’s side work, which is part of the tipped occupation. A genuinely separate role, such as hosting or prep, is a second job where the tip credit doesn’t apply. Some states keep their own limits, so WageTime tracks hours by role.
When someone works two or more roles at different rates in one week, WageTime computes overtime on the weighted-average regular rate automatically. The tip credit applies only to the tipped-occupation hours, and the separate role is paid at its own rate. Bring a real two-role week to the demo and we’ll walk the math on your numbers.
WageTime keeps the per-employee tip records the §45B credit is built from and pulls them into one worksheet showing creditable tips above the $5.15 food-service floor. You or your accountant file Form 8846 from that worksheet. Distributed service charges are excluded, since they’re wages, not tips. WageTime keeps the records and the report; it does not file the credit for you.
One login covers both companies. Each LLC files its own returns under its own EIN, deposits and all, and you pull labor cost for the restaurant and the attached bar separately or rolled together. The tipped dining room, the non-tipped kitchen, and a weekend 1099 sommelier all run in the same place. A second concept is another company in the same login, not another payroll vendor.
$50 per month per company, plus $10 per month per person paid that month. No long-term contracts, cancel anytime. A single restaurant paying 45 people comes to $500 for the month: $50 for the company base plus $450 in per-person fees. Runs are unlimited, so off-cycle final checks and bonuses cost nothing extra. Switching is full-service and paid; we’ll scope it on the demo.
Last Friday’s tip-out sheet, a banquet with an auto-gratuity, and a server who hosted twice last week. Twenty minutes with a payroll specialist on a live demo restaurant: you’ll watch a tip-out pool split, a service charge land in the overtime rate, and the FICA tip-credit records total up.
Book a 20-minute demo