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

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Include correct information on a return or statement. This penalty

Procedure 86-21, 1986-1 C.B. 560 for more additional information. Also

applies to the omission of information as well as the inclusion of

include with your petition a check or money order made payable to the

incorrect information.

“United States Treasury” for the amount of the user fee required for

determination letters. For the current user fee amount, contact the IRS

Gross Receipts

at 1-800-829-1040.

A majority of all the directly tipped employees must consent to any

Gross receipts include all receipts (other than nonallocable receipts –

petition written by an employee. A “majority of employees” means more

see definition below) from cash sales, charge receipts, charges to a

than half of all directly tipped employees employed by the establishment

hotel room (excluding tips charged to the hotel room if your accounting

at the time the petition is filed. Employee groups must follow the

procedures allow these tips to be separated), and the retail value of

procedures in Regulations section 31.6053-3(h), Publication 531,

complimentary food or beverages served to customers as explained

Reporting Tip Income, and Revenue Procedure 86-21.

below.

The IRS will notify you when and for how long the reduced rate is

Also include charged tips in gross receipts, but only to the extent

effective.

that you reduced your cash sales by the amount of any cash you paid

to tipped employees for any charged tips due them. However, if you did

Reporting Allocated Tips To Employees

not reduce cash sales for charged tips paid out to employees, do not

include those charged tips in gross receipts. Do not include state or

Give each employee who has been allocated tips a Form W-2 that

local taxes in gross receipts.

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

Remind all directly and indirectly tipped employees to include all

before the end of the year and the employee asks for the Form W-2, a

TIP

charged tips and all cash tips received in the tip amount that

tip allocation is not required on the early Form W-2. However, you may

they must report to you.

include on the early Form W-2 the employee’s actual tip allocation or a

Nonallocable receipts. These are receipts for carryout sales and

good-faith estimate of the allocation. Signify a good-faith estimate by

receipts with a service charge added of 10% or more. (Nonallocable

writing “estimate” next to the allocated amount in box 8 of the Form

receipts generally include all sales on which tipping is not customary).

W-2.

Complimentary items. Food or beverages served to customers

If no allocation was shown on the early Form W-2 or if the estimated

without charge must be included in gross receipts if: (a) tipping for

allocation on the early form differs from the actual amount by more than

providing them is customary at the establishment, and (b) they are

5%, give the employee Form W-2c, Corrected Wage and Tax

provided in connection with an activity that is engaged in for profit and

Statement, during January of the next year.

whose receipts would not be included in the amount on line 5 of

If you allocate tips among employees by the methods described in

Form 8027.

the instructions for lines 7a through 7c, you are not liable to any

For example, you would have to include in gross receipts the retail

employee if any amount is improperly allocated. However, if the

value of the complimentary drinks served to customers in a gambling

allocation shown on the employee’s Form W-2 differs from the correct

casino because tipping is customary, the gambling casino is an activity

allocation by more than 5%, you must adjust that employee’s allocation

engaged in for profit, and the gambling receipts of the casino are not

and must review the allocable amount of all other employees in the

included in the amount on line 5.

same establishment to assure that the error did not distort any other

However, you would not have to include the retail value of

employee’s share by more than 5%. Use Form W-2c to report the

complimentary hors d’oeuvres at your bar or a complimentary dessert

corrected allocation.

served to a regular patron of your restaurant in gross receipts because

You do not have to send to the IRS separate copies of Forms W-2

the receipts of the bar or restaurant would be included in the amount on

showing allocated tips. The IRS will use the information shown on the

line 5. You would not have to include the value of a fruit basket placed

Forms W-2 that you file with the Social Security Data Operations

in a hotel room in gross receipts since, generally, tipping for it is not

Center.

customary.

Tip allocations have no effect on withholding income or social

security or Medicare taxes from employees’ wages. Allocated tips are

Allocation of Tips

not subject to withholding and are not to be included in boxes 1, 3, 5,

You must allocate tips among employees who receive them if the total

and 7, of Form W-2.

tips reported to you during any payroll period are less than 8% (or the

approved lower rate) of this establishment’s gross receipts for that

period.

Specific Instructions

Generally, the amount allocated is the difference between the total

tips reported by employees and 8% (or the lower rate) of the gross

File a separate Form 8027 for each large food or beverage

receipts, other than nonallocable receipts.

establishment. Use Form 8027-T, Transmittal of Employer’s Annual

Information Return of Tip Income and Allocated Tips, when filing more

Lower rate. You (or a majority of the employees) may request a lower

than one Form 8027. Do not attach any unrelated correspondence.

rate (but not lower than 2%) by submitting an application to: Internal

Revenue Service, Compliance Policy Group, S:C:CP:RC:ET, Room

Name and address of establishment and employer identification

2404, 1111 Constitution Ave., N.W., Washington, DC 20224. The

number. If your preprinted name, EIN, or address information on Form

burden of supplying sufficient information to allow the IRS to estimate

8027 and/or Form 8027-T is not correct, cross out any errors and print

with reasonable accuracy the actual tip rate of the establishment rests

the correct information. If Form 8027 and/or Form 8027-T does not

with the petitioner. Your petition for a lower rate must clearly

have your preprinted information, type or print the name and address of

demonstrate that a rate less than 8% should apply. It must include the

the establishment. They may be different from your mailing address, as

following:

in the case of employers who have more than one establishment. If mail

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Employer’s name, address, and EIN.

is not delivered to the street address of the establishment, enter the

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Establishment’s name, address, and establishment number.

P.O. box number. The employer identification number (EIN) should be

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Detailed description of the establishment that would help to

the same as the number on the Forms W-2 that you give to the

determine the tip rate. The description should include the type of

employees and the Form 941, Employer’s Quarterly Federal Tax Return

restaurant, days and hours of operation, type of service including any

that you file to report wages and taxes for employees working for the

self-service, the person (waiter or waitress, cashier, etc.) to whom the

establishment. Once you have filed a return, a preaddressed Form

customer pays the check, whether the check is paid before or after the

8027 and/or Form 8027-T will be sent to you annually.

meal, and whether alcohol is available.

Type of establishment. Check the box (check only one box) on the

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Past year’s information shown on lines 1 through 6 of Form 8027 as

form that best describes the food or beverage operation at this

well as total carryout sales; total charge sales; percentage of sales for

establishment:

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breakfast, lunch, and dinner; average dollar amount of a guest check;

An establishment that serves evening meals only (with or without

service charge, if any, added to the check; and the percentage of sales

alcoholic beverages).

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with a service charge.

An establishment that serves evening and other meals (with or

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Type of clientele.

without alcoholic beverages).

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Copy of a representative menu for each meal.

An establishment that serves only meals other than evening meals

(with or without alcoholic beverages).

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The petition must contain the following statement and be signed by a

An establishment that serves food, if at all, only as an incidental part

responsible person who is authorized to make and sign a return,

of the business of serving alcoholic beverages.

statement, or other document.

Employer’s name and address. Enter the name and address of the

“Under penalties of perjury, I declare that I have examined this

entity or individual whose EIN is shown above. Enter foreign addresses

application, including accompanying documents, and to the best of my

as follows: city, province or state, and country. Do not abbreviate the

knowledge and belief, the facts presented in support of this petition are

name of the country.

true, correct, and complete.”

Establishment number. Enter a five-digit number to identify the

You must attach to the petition copies of Form 8027 (if any) filed for

individual establishments that you are reporting under the same EIN.

the 3 years prior to your petition. If you are petitioning for more than one

Give each establishment a separate number. For example, each

establishment or you want to know your appeal rights, see Revenue

establishment could be numbered consecutively, starting with 00001.

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Instructions For Form 8027 Page 2

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