Instructions For Form 8027 Page 5
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6Single member limited liability company (LLC) treated
period. The result is each directly tipped employee’s shortfall
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(if any) for the period.
as a disregarded entity for federal income tax purposes.
5. From the amount figured in step 1, subtract the total
The owner of the LLC or principal officer duly authorized to
tips reported by both directly and indirectly tipped
sign.
employees. The result is the amount that has to be allocated
among the directly tipped employees who had a shortfall for
Trust or estate. The fiduciary.
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the payroll period as figured in step 4.
6. For each directly tipped employee who had a shortfall
Form 8027 may also be signed by a duly authorized
for the period as figured in step 4, multiply the amount in
agent of the taxpayer if a valid power of attorney has been
step 5 by the following fraction: the numerator is the
employee’s shortfall (figured in step 4), and the denominator
filed.
is the total shortfall of all directly tipped employees. The
result is the amount of allocated tips for each directly tipped
Alternative signature method. Corporate officers or duly
employee.
authorized agents may sign Form 8027 by rubber stamp,
mechanical device, or computer software program. For
Line 7c. Good-Faith Agreement
details and required documentation, see Rev. Proc.
2005-39, 2005-28 I.R.B. 82, available at
An allocation can be made under a good-faith agreement.
This is a written agreement between you and at least
2005-28_IRB/ar16.html.
two-thirds of the employees of each occupational category
of employees who receive tips (for example, waitstaff,
Example for Line 7b. Gross Receipts Method
bussers, and maitre d’s) working in the establishment when
A large food or beverage establishment has gross receipts
the agreement is adopted. The agreement must:
for a payroll period of $100,000 and has tips reported for the
1. Provide for an allocation of the difference between
payroll period of $6,200. Directly tipped employees reported
total tips reported and 8% (or the lower rate) of gross
receipts among employees who receive tips that
$5,700, while indirectly tipped employees reported $500.
approximates the actual distribution of tip income among the
Directly
Gross receipts
employees;
tipped
for payroll
2. Be effective the first day of a payroll period that begins
employees
period
Tips reported
after the date the agreement is adopted, but no later than
January 1 of the next year;
A
$18,000
$1,080
3. Be adopted when there are employees in each
B
16,000
880
occupational category who would be affected by the
C
23,000
1,810
D
17,000
800
agreement; and
E
12,000
450
4. Allow for revocation by a written agreement adopted
F
14,000
680
by at least two-thirds of the employees in occupational
Totals
$100,000
$5,700
categories affected by the agreement when it is revoked.
The revocation is effective only at the beginning of a payroll
1.
$100,000 (gross receipts) x .08 = $8,000
period.
2.
$8,000 - $500 (tips reported by indirectly tipped employees) = $7,500
3.
Directly tipped
Note. You must attach a copy of your good-faith agreement
Directly
employee’s
(Times)
Employee’s
when filing a paper Form 8027. Pub. 1239 provides
tipped
share of 8% of
Gross receipts share of 8% of
instructions on submitting a copy of your good-faith
employees
the gross
ratio
gross
agreement when filing electronically.
A
$7,500
18,000/100,000 =
$1,350
B
$7,500
16,000/100,000 =
1,200
Line 8. Total Number of Directly Tipped
C
$7,500
23,000/100,000 =
1,725
D
$7,500
17,000/100,000 =
1,275
Employees
E
$7,500
12,000/100,000 =
900
Enter the total number of directly tipped employees who
F
$7,500
14,000/100,000 =
1,050
Total
$7,500
worked at the establishment during 2011. This is the
cumulative total of all directly tipped employees who worked
4.
Directly
Employee’s
at the establishment at any time during the year. If you have
tipped
share of 8% of
(Minus)
Employee
a large turnover of directly tipped employees, this number
employees
the gross
Tips reported
shortfall
may be large. Do not use this number to determine if you
A
$1,350
$1,080 =
$270
must file Form 8027. Instead, see the Worksheet for
B
$1,200
880 =
320
Determining Whether To File Form 8027, earlier.
C
$1,725
1,810 =
–
D
$1,275
800 =
475
Signature
E
$ 900
450 =
450
F
$1,050
680 =
370
Sign your name and include your title. Then enter the date
Total shortfall
$1,885
signed and the best daytime telephone number where IRS
5.
$8,000 less $6,200 (total tips reported) = $1,800 (amount allocable
can reach you, including area code.
among employees who had a shortfall)
Who Must Sign?
6.
Shortfall
Allocable
Amount of
(Times)
employees
amount
Shortfall ratio
allocation
Form 8027 must be signed as follows.
A
$1,800
$270/1,885 =
$258
Sole proprietorship. The individual who owns the
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B
$1,800
320/1,885 =
306
D
$1,800
475/1,885 =
454
business.
E
$1,800
450/1,885 =
430
Corporation (including a limited liability company
F
$1,800
370/1,885 =
353
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(LLC) treated as a corporation). The president, vice
Since employee C has no shortfall, there is no allocation to C.
president, or other principal officer duly authorized to sign.
Partnership (including an LLC treated as a
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In this example, the total amount of allocation is
partnership) or unincorporated organization. A
$1,801 resulting from the rounding off to whole
TIP
responsible and duly authorized member, partner, or officer
numbers.
having knowledge of its affairs.
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