Privacy Act and Paperwork Reduction Act Notice. We
Employer’s Optional Worksheet
ask for the information on this form to carry out the Internal
Revenue laws of the United States. You are required to give
for Tipped Employees
us the information. We need it to ensure that you are
Unreported tip income can lead to additional employer
complying with these laws and to allow us to figure and
liability for FICA taxes. As a means of determining if your
collect the right amount of tax.
employees are reporting all of their tips to you, please take a
Chapter 61, Information and Returns, of Subtitle F,
few minutes to voluntarily complete the following worksheet.
Procedure and Administration, requires certain employers to
Completing this worksheet is only for the employer’s
report gross receipts, tips reported to them, and any
information (it is not sent to the IRS).
allocated tips; and to furnish the amount of any allocated
tips to affected employees. Section 6053 and its related
regulations provide the definitions and methodology to be
1. Enter amount from Form 8027, line 1 . . . . . . . . . 1.
used in completing these forms. If you fail to provide this
2. Enter amount from Form 8027, line 2 . . . . . . . . . 2.
information in a timely manner, you may be liable for
3. Divide line 1 by line 2, enter as a decimal (at least 4
decimal places) . . . . . . . . . . . . . . . . . . . . . . . . 3.
penalties as provided by section 6721.
4. Enter amount from Form 8027, line 4c . . . . . . . . 4.
You are not required to provide the information requested
5. Enter amount from Form 8027, line 5 . . . . . . . . . 5.
on a form that is subject to the Paperwork Reduction Act
6. Divide line 4 by line 5, enter as a decimal (at least 4
unless the form displays a valid OMB control number. Books
decimal places) . . . . . . . . . . . . . . . . . . . . . . . . 6.
or records relating to a form or its instructions must be
7. Subtract line 6 from line 3; if zero or less, stop here 7.
retained as long as their contents may become material in
8. Potential unreported tips. Multiply line 7 by line 5
the administration of any Internal Revenue law.
Generally, tax returns and return information are
Once you have completed the worksheet:
confidential, as required by section 6103. However, section
If the entry on line 7 is zero or less, your employees are
6103 allows or requires the Internal Revenue Service to
probably accurately reporting their tips; however,
disclose or give the information shown on your tax return to
If the entry on line 8 is greater than zero, depending on
others as described in the Code. For example, we may
the type of operation you have and whether or not you have
disclose your tax information to the Department of Justice
allocated tips, it is possible that your employees are not
for civil and criminal litigation, and to cities, states, the
reporting all of their tip income to you.
District of Columbia, and U.S commonwealths and
Another quick method to determine if your
possessions to administer their tax laws. We may also
employees are properly reporting all of their tips to
disclose this information to other countries under a tax
you is to compare the rate of tips reported on credit
treaty, to federal and state agencies to enforce federal
sales to the rate of tips reported on cash sales. For
nontax criminal laws, or to federal law enforcement and
example, if line 3 in the worksheet above greatly exceeds
intelligence agencies to combat terrorism.
the rate determined from dividing reported cash tips by
The time needed to complete and file these forms will
reportable cash receipts (that is, total cash receipts less
vary depending on individual circumstances. The estimated
nonallocable cash receipts), some of your employees may
average times are:
not be reporting all of their tips to you and you generally
should be showing an amount on line 7 (“Allocation of tips”)
of Form 8027.
Recordkeeping . . . . . . . . . . . . . . . . . .
9 hr., 33 min.
Learning about the law or the form . . . .
Preparing and sending the form to the
If it appears that not all tips are being reported to you, the
IRS . . . . . . . . . . . . . . . . . . . . . . . . . .
1 hr., 5 min.
IRS offers a service called the Tip Rate Determination &
If you have comments concerning the accuracy of these
Education Program. This program can assist you, the
time estimates or suggestions for making these forms
employer, in implementing more effective methods of tip
simpler, we would be happy to hear from you. You can email
income reporting. The program also offers assistance in
us at email@example.com. Enter “Form 8027” on the subject
educating tipped employees concerning their obligations
line. Or write to the Internal Revenue Service, Tax Products
relating to the reporting of any tip income they receive. To
Coordinating Committee, SE:W:CAR:MP:T:M:S, 1111
find out more about this program or to participate in a
Constitution Ave. NW, IR-6526, Washington, DC 20224. Do
voluntary tip compliance agreement, visit IRS.gov and type
not send the tax forms to this address. Instead, see Where
“restaurant” in the search box. You may also call
To File, earlier.
1-800-829-4933 or visit
IRS Taxpayer Assistance Center in your area; or send an
and request information on