Instructions For Form 8027 Page 4
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1
2
3
4tipped employees reported $5,700, while indirectly tipped employees
1. Enter amount from Form 8027, line 1 . . . . . . . 1.
reported $500.
Directly tipped
Gross receipts for
2. Enter amount from Form 8027, line 2 . . . . . . . 2.
employees
payroll period
Tips reported
3. Divide line 1 by line 2, enter as a decimal (at least 4
A
$18,000
$1,080
decimal places) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
B
16,000
880
4. Enter amount from Form 8027, line 4c . . . . . . . 4.
C
23,000
1,810
5. Enter amount from Form 8027, line 5 . . . . . . . 5.
D
17,000
800
E
12,000
450
6. Divide line 4 by line 5, enter as a decimal (at least 4
F
14,000
680
decimal places)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
$100,000
$5,700
7. Subtract line 6 from line 3; if zero or less, stop here . . . . . 7.
1.
$100,000 (gross receipts) X .08 = $8,000
8. Potential unreported tips. Multiply line 7 by line 5 . . . . . . . 8.
2.
$8,000 - $500 (tips reported by indirectly tipped employees) = $7,500
Once you have completed the worksheet:
3.
Directly tipped
Employee’s
•
If the entry on line 7 is zero or less, your employees are probably
Directly tipped
employee’s share of
Gross
share of 8% of
accurately reporting their tips; however,
employees
8% of the gross
receipts ratio
gross
•
If there is an entry on line 8, depending on the type of operation you
A
$7,500..... X
18,000/
have and whether or not you have allocated tips, it is possible that your
100,000 =
$1,350
employees are not reporting all of their tip income to you.
B
$7,500..... X
16,000/
Need Help?
100,000... =
1,200
If it appears that not all tips are being reported to you, the IRS offers a
C
$7,500..... X
23,000/
service called the Tip Rate Determination & Education Program.
100,000... =
1,725
This program can assist you, the employer, in implementing more
effective methods of tip income reporting. The program also offers
D
$7,500..... X
17,000/
assistance in educating tipped employees concerning their obligations
100,000... =
1,275
relating to the reporting of any tip income they receive. To find out more
E
$7,500..... X
12,000/
about this program or to identify the IRS Tip Coordinator for your state,
100,000... =
900
call 1-800-829-1040 or visit the IRS Web Site at and
F
$7,500..... X
14,000/
search for “Voluntary Compliance Agreements.”
100,000... =
1,050
$7,500
Privacy Act and Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue laws of the
4.
Directly tipped
Employee’s share of
Employee
United States. You are required to give us the information. We need it
employees
8% of the gross
Tips reported
shortfall
to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
A
$1,350..... $1,080..... =
$270
Chapter 61, Information and Returns, of Subtitle F, Procedure and
B
1,200.....
880..... =
320
Administration, requires certain employers to report gross receipts, tips
C
1,725.....
1,810..... =
–
reported to them, and any allocated tips; and to furnish the amount of
any allocated tips to affected employees. Section 6053 and its related
D
1,275.....
800..... =
475
regulations provide the definitions and methodology to be used in
E
900.....
450..... =
450
completing these forms. Routine uses of this information include giving
F
1,050.....
680..... =
370
it to the Department of Justice for civil and criminal litigation, and to
cities, states, and the District of Columbia for use in administering their
Total shortfall
$1,885
tax laws. If you fail to provide this information in a timely manner you
5.
$8,000 less $6,200 (total tips reported) = $1,800 (amount allocable
may be liable for penalties as provided by section 6721.
among employees who had a shortfall)
You are not required to provide the information requested on a form
that is subject to the Paperwork Reduction Act unless the form displays
6.
Shortfall
Amount of
a valid OMB control number. Books or records relating to a form or its
employees
Allocable amount
Shortfall ratio
allocation
instructions must be retained as long as their contents may become
A
$1,800..... X
270/1,885 =
$258
material in the administration of any Internal Revenue law. Generally,
tax returns and return information are confidential, as required by
B
1,800..... X
320/1,885 =
306
section 6103.
D
1,800..... X
475/1,885 =
454
The time needed to complete and file these forms will vary
E
1,800..... X
450/1,885 =
430
depending on individual circumstances. The estimated average times
are:
F
1,800..... X
370/1,885 =
353
Forms
8027
8027-T
Because employee C has no shortfall, C gets no allocation.
Recordkeeping . . . . . . . . . . . . . . . . . . .
9 hr., 49 min.
43 min.
In this example, the total amount of allocation is $1,801 resulting
Learning about the law or the form . . . . .
53 min.
TIP
from the rounding off to whole numbers.
Preparing and sending the form to the IRS
1 hr.
4 min.
If you have comments concerning the accuracy of these time
estimates or suggestions for making these forms simpler, we would be
Employer’s Optional Worksheet
happy to hear from you. You can write to the Tax Forms Committee,
for Tipped Employees
Western Area Distribution Center, Rancho Cordova, CA 95743-0001.
Do not send the tax forms to this address. Instead, see Where To File
Unreported tip income can lead to additional employer liability for FICA
on page 1.
taxes. As a means of determining if your employees are reporting all of
their tips to you, please take a few minutes to voluntarily complete the
following worksheet. Completing this worksheet is only for the
employer’s information (it is not sent to the IRS).
-4-
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