Instructions For Form 8027 Page 2


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.
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
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
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).
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
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
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
in the case of employers who have more than one establishment. If mail
Employer’s name, address, and EIN.
is not delivered to the street address of the establishment, enter the
Establishment’s name, address, and establishment number.
P.O. box number. The employer identification number (EIN) should be
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
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
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).
with a service charge.
An establishment that serves evening and other meals (with or
Type of clientele.
without alcoholic beverages).
Copy of a representative menu for each meal.
An establishment that serves only meals other than evening meals
(with or without alcoholic beverages).
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.


00 votes

Related Articles

Related forms

Related Categories

Parent category: Financial
Page of 4