Instructions For Form 8027 Page 2


Furnish the employee’s TIN (taxpayer identification number, usually
“Under penalties of perjury, I declare that I have examined this
the social security number) on Form W-2, Wage and Tax Statement.
application, including accompanying documents, and to the best of my
Timely file Form W-2 and give a Form W-2 to the employee.
knowledge and belief, the facts presented in support of this petition are
Include your EIN on any return, statement, or document.
true, correct, and complete.”
Include correct information on a return or statement. This penalty
You must attach to the petition copies of Form 8027 (if any) filed for
applies to the omission of information as well as the inclusion of
the 3 years prior to your petition. If you are petitioning for more than one
incorrect information.
establishment or you want to know your appeal rights, you should see
Revenue Procedure 86-21, 1986-1 C.B. 560. Also include with your
Gross Receipts
petition a check or money order made payable to the “United States
Gross receipts include all receipts (other than nonallocable receipts –
Treasury” for the amount of the user fee required for determination
see definition below) from cash sales, charge receipts, charges to a
letters. For the current user fee amount, contact the IRS at
hotel room (excluding tips charged to the hotel room if your accounting
procedures allow these tips to be separated), and the retail value of
A majority of all the directly tipped employees must consent to any
complimentary food or beverages served to customers as explained
petition written by an employee. A “majority of employees” means more
than half of all the directly tipped employees employed by the
Also include charged tips in gross receipts, but only to the extent
establishment at the time the petition is filed. Employee groups must
that you reduced your cash sales by the amount of any cash you paid
follow the procedures in Regulations section 31.6053-3(h), Pub. 531,
to tipped employees for any charged tips due them. However, if you did
Reporting Tip Income, and Revenue Procedure 86-21.
not reduce cash sales for charged tips paid out to employees, do not
The IRS will notify you when and for how long the reduced rate is
include those charged tips in gross receipts. Do not include state or
local taxes in gross receipts.
Remind all your directly and indirectly tipped employees to
Reporting Allocated Tips To Employees
include all charged tips and all cash tips received in the tip
Give each employee who has been allocated tips a Form W-2 that
amount they must report to you.
shows the allocated amount in box 8. The form must be furnished to the
employee by January 31 of the following year. If employment ends
Nonallocable receipts. These are receipts for carryout sales and
before the end of the year and the employee asks for the Form W-2, a
receipts with a service charge added to 10% or more. (Nonallocable
tip allocation is not required on the early Form W-2. However, you may
receipts generally include all sales on which tipping is not customary.)
include on the early Form W-2 the employee’s actual tip allocation or a
Complimentary items. Food or beverages served to customers
good-faith estimate of the allocation. Signify a good-faith estimate by
without charge must be included in gross receipts if: (a) tipping for
writing “estimate” next to the allocated amount in box 8 of the Form
providing them is customary at the establishment, and (b) they are
provided in connection with an activity that is engaged in for profit and
If no allocation was shown on the early Form W-2 or if the estimated
whose receipts would not be included in the amount on line 5 of
allocation on the early form differs from the actual amount by more than
Form 8027.
5%, give the employee Form W-2c, Corrected Wage and Tax
For example, you would not have to include the retail value of
Statement, during January of the next year.
complimentary hors d’oeuvres at your bar or a complimentary dessert
If you allocate tips among employees by the methods described in
served to a regular patron of your restaurant in gross receipts because
the instructions for lines 7a through 7c, you are not liable to any
the receipts of the bar or restaurant would be included in the amount on
employee if any amount is improperly allocated. However, if the
line 5. You would not have to include the value of a fruit basket placed
allocation shown on the employee’s Form W-2 differs from the correct
in a hotel room in gross receipts since, generally, tipping for it is not
allocation by more than 5%, you must adjust that employee’s allocation
and must review the allocable amount of all other employees in the
However, you would have to include in gross receipts the retail value
same establishment to assure that the error did not distort any other
of the complimentary drinks served to customers in a gambling casino
employee’s share by more than 5%. Use Form W-2c to report the
because tipping is customary, the gambling casino is an activity
corrected allocation.
engaged in for profit, and the gambling receipts of the casino are not
You do not have to send to the IRS separate copies of Forms W-2
included in the amount on line 5.
showing allocated tips. The IRS will use the information shown on the
Forms W-2 that you file with the Social Security Data Operations
Allocation of Tips
You must allocate tips among employees who receive them if the total
Tip allocations have no effect on withholding income or social
tips reported to you during any payroll period are less than 8% (or the
security or Medicare taxes from employees’ wages. Allocated tips are
approved lower rate) of this establishment’s gross receipts for that
not subject to withholding and are not to be included in boxes 1, 3, 5,
and 7, of Form W-2.
Generally, the amount allocated is the difference between the total
tips reported by employees and 8% (or the lower rate) of the gross
receipts, other than nonallocable receipts.
Specific Instructions
Lower rate. You (or a majority of the employees) may request a lower
rate (but not lower than 2%) by submitting an application to: Internal
File a separate Form 8027 for each large food or beverage
Revenue Service, Compliance Policy Group, S:C:CP:RC:ET — Room
establishment. Use Form 8027-T, Transmittal of Employer’s Annual
2404, 1111 Constitution Ave., N.W., Washington, DC 20224. The
Information Return of Tip Income and Allocated Tips, when filing more
burden of supplying sufficient information to allow the IRS to estimate
than one Form 8027. Do not attach any unrelated correspondence.
with reasonable accuracy the actual tip rate of the establishment rests
Name and address of establishment and employer identification
with the petitioner. Your petition for a lower rate must clearly
number. Use the name and address label provided. Cross out any
demonstrate that a rate less than 8% should apply. It must include the
errors and print the correct information on the label. If you do not have a
label, type or print the name and address of the establishment. They
Employer’s name, address, and EIN.
may be different from your name and address, as in the case of
Establishment’s name, address, and establishment number.
employers who have more than one establishment. If mail is not
Detailed description of the establishment that would help to
delivered to the address, enter the P.O. box number. The employer
determine the tip rate. The description should include the type of
identification number (EIN) should be the same as the number on the
restaurant, days and hours of operation, type of service including any
Forms W-2 that you give to the employees and the Form 941,
self-service, the person (waiter or waitress, cashier, etc.) to whom the
Employer’s Quarterly Federal Tax Return, you file to report wages and
customer pays the check, whether the check is paid before or after the
taxes for employees working for the establishment.
meal, and whether alcohol is available.
Past year’s information shown on lines 1 through 6 of Form 8027 as
Type of establishment. Mark the checkbox (mark only one
well as total carryout sales; total charge sales; percentage of sales for
checkbox) on the form that best describes the food or beverage
breakfast, lunch, and dinner; average dollar amount of a guest check;
operation at this establishment:
service charge, if any, added to the check; and the percentage of sales
An establishment that serves evening meals only (with or without
with a service charge.
alcoholic beverages).
Type of clientele.
An establishment that serves evening and other meals (with or
Copy of a representative menu for each meal.
without alcoholic beverages).
An establishment that serves only meals other than evening meals
The petition must contain the following statement and be signed by a
(with or without alcoholic beverages).
responsible person who is authorized to make and sign a return,
An establishment that serves food, if at all, only as an incidental part
statement, or other document.
of the business of serving alcoholic beverages.


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