Instructions For Form 8027 Page 5
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6Trust or estate. The fiduciary.
employees. The result is the amount that has to be allocated
•
among the directly tipped employees who had a shortfall for
Form 8027 may also be signed by a duly authorized
the payroll period as figured in step 4.
agent of the taxpayer if a valid power of attorney has been
6. For each directly tipped employee who had a shortfall
filed.
for the period as figured in step 4, multiply the amount in
Alternative signature method. Corporate officers or duly
step 5 by the following fraction: the numerator is the
authorized agents may sign Form 8027 by rubber stamp,
employee’s shortfall (figured in step 4), and the denominator
mechanical device, or computer software program. For
is the total shortfall of all directly tipped employees. The
details and required documentation, see Rev. Proc.
result is the amount of allocated tips for each directly tipped
2005-39. You can find Rev. Proc. 2005-39, on page 82 of
employee.
Internal Revenue Bulletin 2005-28 at
2005-28_IRB/ar16.html.
Line 7c. Good-faith agreement. An allocation can be
Example for Line 7b. Gross receipts method. A large
made under a good-faith agreement. This is a written
food or beverage establishment has gross receipts for a
agreement between you and at least two-thirds of the
payroll period of $100,000 and has tips reported for the
employees of each occupational category of employees who
payroll period of $6,200. Directly tipped employees reported
receive tips (for example, waitstaff, bussers, and maitre d’s)
$5,700, while indirectly tipped employees reported $500.
working in the establishment when the agreement is
adopted. The agreement must:
Directly
Gross receipts
tipped
for payroll
1. Provide for an allocation of the difference between
employees
period
Tips reported
total tips reported and 8% (or the lower rate) of gross
receipts among employees who receive tips that
A
$18,000
$1,080
approximates the actual distribution of tip income among the
B
16,000
880
employees;
C
23,000
1,810
D
17,000
800
2. Be effective the first day of a payroll period that begins
E
12,000
450
after the date the agreement is adopted, but no later than
F
14,000
680
January 1 of the next year;
Totals
$100,000
$5,700
3. Be adopted when there are employees in each
occupational category who would be affected by the
1.
$100,000 (gross receipts) x .08 = $8,000
2.
agreement; and
$8,000 - $500 (tips reported by indirectly tipped employees) = $7,500
4. Allow for revocation by a written agreement adopted
3.
Directly tipped
by at least two-thirds of the employees in occupational
Directly
employee’s
(Times)
Employee’s
categories affected by the agreement when it is revoked.
tipped
share of 8% of
Gross receipts
share of 8%
The revocation is effective only at the beginning of a payroll
employees
the gross
ratio
of gross
period.
A
$7,500
18,000/100,000 =
$1,350
B
$7,500
16,000/100,000 =
1,200
C
$7,500
23,000/100,000 =
1,725
Note. You must attach a copy of your good-faith agreement
D
$7,500
17,000/100,000 =
1,275
when filing a paper Form 8027. Pub. 1239 provides
E
$7,500
12,000/100,000 =
900
instructions on submitting a copy of your good-faith
F
$7,500
14,000/100,000 =
1,050
agreement when filing electronically.
Total
$7,500
Line 8. Total number of directly tipped employees.
4.
Directly
Employee’s
tipped
share of 8% of
(Minus)
Employee
Enter the total number of directly tipped employees who
employees
the gross
Tips reported
shortfall
worked at the establishment during 2010. This is the
cumulative total of all directly tipped employees who worked
A
$1,350
$1,080 =
$270
B
$1,200
880 =
320
at the establishment at any time during the year. If you have
C
$1,725
1,810 =
–
a large turnover of directly tipped employees, this number
D
$1,275
800 =
475
may be large. Do not use this number to determine if you
E
$ 900
450 =
450
must file Form 8027. Instead, see the Worksheet for
F
$1,050
680 =
370
Determining Whether To File Form 8027 on page 1.
Total shortfall
$1,885
5.
$8,000 less $6,200 (total tips reported) = $1,800 (amount allocable
among employees who had a shortfall)
Signature
6.
Shortfall
Allocable
(Times)
Amount of
Sign your name and include your title. Then enter the date
employees
amount
Shortfall ratio
allocation
signed and the best daytime telephone number where IRS
can reach you, including area code.
A
$1,800
270/1,885 =
$258
B
$1,800
320/1,885 =
306
Who must sign the Form 8027? Form 8027 must be
D
$1,800
475/1,885 =
454
E
$1,800
450/1,885 =
430
signed as follows.
F
$1,800
370/1,885 =
353
Sole proprietorship. The individual who owns the
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Since employee C has no shortfall, there is no allocation to C.
business.
In this example, the total amount of allocation is
Corporation (including a limited liability company
$1,801 resulting from the rounding off to whole
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TIP
( LLC) treated as a corporation). The president, vice
numbers.
president, or other principal officer duly authorized to sign.
Partnership (including an LLC treated as a
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partnership) or unincorporated organization. A
responsible and duly authorized member or officer having
knowledge of its affairs.
Single member limited liability company (LLC) treated
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as a disregarded entity for federal income tax purposes.
The owner of the LLC or principal officer duly authorized to
sign.
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