Instructions For Form 8027 (Page 2 of 4) in pdf

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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

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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

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Include your EIN on any return, statement, or document.

true, correct, and complete.”

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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

1-800-829-1040.

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

below.

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

effective.

local taxes in gross receipts.

Remind all your directly and indirectly tipped employees to

Reporting Allocated Tips To Employees

TIP

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

W-2.

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

customary.

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

Center.

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,

period.

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

following:

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label, type or print the name and address of the establishment. They

Employer’s name, address, and EIN.

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may be different from your name and address, as in the case of

Establishment’s name, address, and establishment number.

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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.

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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:

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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).

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Type of clientele.

An establishment that serves evening and other meals (with or

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Copy of a representative menu for each meal.

without alcoholic beverages).

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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).

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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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Instructions For Form 8027 Page 2

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