Instructions For Form 8027 Page 4
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2
3
4Once you have completed the worksheet:
•
1.
$100,000 (gross receipts) X .08 = $8,000
If the entry on line 7 is zero or less, your employees are probably
accurately reporting their tips; however,
2.
$8,000 - $500 (tips reported by indirectly tipped employees) = $7,500
•
If the entry on line 8 is greater than zero, depending on the type of
3.
Directly tipped
operation you have and whether or not you have allocated tips, it is
employee’s share
(Times)
Employee’s
possible that your employees are not reporting all of their tip income to
Directly tipped
of 8% of the
Gross receipts
share of 8% of
you.
employees
gross
ratio
gross
Another quick method to determine if your employees are
TIP
properly reporting all of their tips to you is to compare the rate of
A
$7,500
18,000/100,000
tips reported on credit sales to the rate of tips reported on cash
=
$1,350
sales. For example, if line 3 in the worksheet above greatly exceeds the
B
$7,500
16,000/100,000
rate determined from dividing reported cash tips by reportable cash
=
1,200
receipts (i.e., total cash receipts less nonallocable cash receipts), some
C
$7,500
23,000/100,000
of your employees may not be reporting all of their tips to you and you
=
1,725
generally should be showing an amount on line 7 (“Allocation of tips”) of
Form 8027.
D
$7,500
17,000/100,000
=
1,275
Need Help?
E
$7,500
12,000/100,000
If it appears that not all tips are being reported to you, the IRS offers a
=
900
service called the Tip Rate Determination & Education Program.
This program can assist you, the employer, in implementing more
F
$7,500
14,000/100,000
effective methods of tip income reporting. The program also offers
=
1,050
assistance in educating tipped employees concerning their obligations
$7,500
relating to the reporting of any tip income they receive. To find out more
about this program or to identify the IRS Tip Coordinator for your state,
4.
Employee’s share
call 1-800-829-1040 or visit the IRS Web Site at and
Directly tipped
of 8% of the
(Minus)
Employee
search for “Voluntary Compliance Agreements.”
employees
gross
Tips Reported
shortfall
A
$1,350
$1,080 =
$270
Privacy Act and Paperwork Reduction Act Notice. We ask for the
B
1,200
880 =
320
information on this form to carry out the Internal Revenue laws of the
United States. You are required to give us the information. We need it
C
1,725
1,810 =
–
to ensure that you are complying with these laws and to allow us to
D
1,275
800 =
475
figure and collect the right amount of tax.
E
900
450 =
450
Chapter 61, Information and Returns, of Subtitle F, Procedure and
Administration, requires certain employers to report gross receipts, tips
F
1,050
680=
370
reported to them, and any allocated tips; and to furnish the amount of
Total shortfall
$1,885
any allocated tips to affected employees. Section 6053 and its related
regulations provide the definitions and methodology to be used in
5.
$8,000 less $6,200 (total tips reported) = $1,800 (amount allocable
completing these forms. If you fail to provide this information in a timely
among employees who had a shortfall)
manner you may be liable for penalties as provided by section 6721.
6.
Shortfall
(Times)
Amount of
You are not required to provide the information requested on a form
employees
Allocable amount Shortfall ratio
allocation
that is subject to the Paperwork Reduction Act unless the form displays
a valid OMB control number. Books or records relating to a form or its
A
$1,800
270/1,885 =
$258
instructions must be retained as long as their contents may become
B
1,800
320/1,885 =
306
material in the administration of any Internal Revenue law.
D
1,800
475/1,885 =
454
Generally, tax returns and return information are confidential, as
required by section 6103. However, section 6103 allows or requires the
E
1,800
450/1,885 =
430
Internal Revenue Service to disclose or give the information shown on
F
1,800
370/1,885 =
353
your tax return to others as described in the Code. For example, we
may disclose your tax information to the Department of Justice for civil
and criminal litigation, and to cities, states, and the District of Columbia
Because employee C has no shortfall, C gets no allocation.
for use in administering their tax laws. We may also disclose this
In this example, the total amount of allocation is $1,801 resulting
information to Federal and state agencies to enforce Federal nontax
TIP
from the rounding off to whole numbers.
criminal laws and to combat terrorism.
The time needed to complete and file these forms will vary
depending on individual circumstances. The estimated average times
Employer’s Optional Worksheet
are:
for Tipped Employees
Forms
8027
8027-T
Unreported tip income can lead to additional employer liability for FICA
Recordkeeping . . . . . . . . . . . . . . . . . . .
9 hr., 47 min.
43 min.
taxes. As a means of determining if your employees are reporting all of
Learning about the law or the form . . . . .
53 min.
their tips to you, please take a few minutes to voluntarily complete the
following worksheet. Completing this worksheet is only for the
Preparing and sending the form to the IRS
1 hr.
4 min.
employer’s information (it is not sent to the IRS).
If you have comments concerning the accuracy of these time
estimates or suggestions for making these forms simpler, we would be
1. Enter amount from Form 8027, line 1 . . . . . . . 1.
happy to hear from you. You can write to the Tax Forms Committee,
Western Area Distribution Center, Rancho Cordova, CA 95743-0001.
2. Enter amount from Form 8027, line 2 . . . . . . . 2.
Do not send the tax forms to this address. Instead, see Where To File
on page 1.
3. Divide line 1 by line 2, enter as a decimal (at least 4
decimal places) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
4. Enter amount from Form 8027, line 4c . . . . . . . 4.
5. Enter amount from Form 8027, line 5 . . . . . . . 5.
6. Divide line 4 by line 5, enter as a decimal (at least 4
decimal places)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
7. Subtract line 6 from line 3; if zero or less, stop here . . . . . 7.
8. Potential unreported tips. Multiply line 7 by line 5 . . . . . . . 8.
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