Instructions For Form 8027 (Page 2 of 6) in pdf

Extension of time to file. Filers of Form 8027 submitted on

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

paper, electronically or magnetically may request an extension

complimentary hors d’oeuvres at your bar or a complimentary

of time to file on Form 8809, Application for Extension of Time

dessert served to a regular patron of your restaurant in gross

To File Information Returns. File Form 8809 as soon as you

receipts because the receipts of the bar or restaurant would be

know an extension of time to file is necessary, but not later than

included in the amount on line 5. You would not have to include

February 28, 2006.

the value of a fruit basket placed in a hotel room in gross

receipts since, generally, tipping for it is not customary.

Where To File

Allocation of Tips

File with the Internal Revenue Service, Cincinnati, OH 45999.

You must allocate tips among employees who receive them if

Reporting on magnetic media. If you are the employer and

the total tips reported to you during any payroll period are less

you file 250 or more Forms 8027, you must file the returns

than 8% (or the approved lower rate) of this establishment’s

electronically or magnetically. For details, see Regulations

gross receipts for that period.

section 301.6011-2.

Generally, the amount allocated is the difference between

Specifications for filing. See Pub. 1239, Specifications for

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

Filing Form 8027, Employer’s Annual Information Return of Tip

of the gross receipts, other than nonallocable receipts.

Income and Allocated Tips, Electronically or Magnetically. This

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

publication provides instructions on how to file and how to

a lower rate (but not lower than 2%) by submitting an

request a waiver from magnetic media reporting because of

application to:

undue hardship. To obtain a copy of Pub. 1239, visit the IRS

website at or call 1-800-TAX-FORM

Internal Revenue Service

(1-800-829-3676).

Compliance Policy Group

Penalties

S:C:CP:RC:ET, Room 2404

1111 Constitution Ave. NW

The law provides for a penalty if you do not file Form 8027 (and

Washington, DC 20224

Form 8027-T) on time unless you can show reasonable cause

The burden of supplying sufficient information to allow the

for the delay. Employers filing late (after the due date including

IRS to estimate with reasonable accuracy the actual tip rate of

extensions) should attach an explanation to the return to show

the establishment rests with the petitioner. Your petition for a

reasonable cause. You may be charged penalties for each

lower rate must clearly demonstrate that a rate less than 8%

failure to:

•

should apply. It must include the following:

Timely file a correct information return including failure to file

•

Employer’s name, address, and EIN;

electronically or magnetically, if required.

•

Establishment’s name, address, and establishment number;

Timely provide a correct Form W-2 to the employee.

•

Detailed description of the establishment that would help to

For more information on penalties for untimely or incorrect

determine the tip rate. The description should include the type

Forms W-2 or 8027, see Pub. 1239 and the Instructions for

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

Forms W-2 and W-3.

including any self-service, the person (waiter or waitress,

cashier, etc.) to whom the customer pays the check, whether

Gross Receipts

the check is paid before or after the meal, and whether alcohol

Gross receipts include all receipts (other than nonallocable

is available;

•

receipts, see definition below) from cash sales, charge receipts,

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

charges to a hotel room (excluding tips charged to the hotel

8027 as well as total carryout sales; total charge sales;

room if your accounting procedures allow these tips to be

percentage of sales for breakfast, lunch, and dinner; average

separated), and the retail value of complimentary food or

dollar amount of a guest check; service charge, if any, added to

beverages served to customers as explained below.

the check; and the percentage of sales with a service charge;

•

Type of clientele;

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

•

Copy of a representative menu for each meal.

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

cash you paid to tipped employees for any charged tips due

The petition must contain the following statement and be signed

them. However, if you did not reduce cash sales for charged

by a responsible person who is authorized to make and sign a

tips paid out to employees, do not include those charged tips in

gross receipts. Do not include state or local taxes in gross

return, statement, or other document.

receipts.

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

this application, including accompanying documents, and to the

Remind all directly and indirectly tipped employees to

best of my knowledge and belief, the facts presented in support

TIP

include all charged tips and all cash tips received in the

of this petition are true, correct, and complete.”

tip amount that they must report to you.

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

Nonallocable receipts. These are receipts for carryout sales

filed for the 3 years prior to your petition. If you are petitioning

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

for more than one establishment or you want to know your

(Nonallocable receipts generally include all sales on which

appeal rights, see Revenue Procedure 86-21, 1986-1 C.B. 560

tipping is not customary).

for additional information. Also include with your petition a

Complimentary items. Food or beverages served to

check or money order made payable to the “United States

customers without charge must be included in gross receipts if:

Treasury” for the amount of the user fee required for

(a) tipping for providing them is customary at the establishment,

determination letters. For the current user fee amount, contact

and (b) they are provided in connection with an activity that is

the IRS at 1-800-829-1040.

engaged in for profit and whose receipts would not be included

A majority of all the directly tipped employees must consent

in the amount on line 5 of Form 8027.

to any petition written by an employee. A “majority of

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

employees” means more than half of all directly tipped

retail value of the complimentary drinks served to customers in

employees employed by the establishment at the time the

a gambling casino because tipping is customary, the gambling

petition is filed. Employee groups must follow the procedures in

casino is an activity engaged in for profit, and the gambling

Regulations section 31.6053-3(h), Pub. 531, Reporting Tip

receipts of the casino are not included in the amount on line 5.

Income, and Revenue Procedure 86-21.

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Instructions For Form 8027 Page 2

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