Instructions For Form 8027 (2015) (Page 3 of 8) in pdf

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

Treasury” for the amount of the user fee required for

gross receipts since, generally, tipping for it isn't customary.

determination letters.

Allocation of Tips

For the current user fee amount, consult the first revenue

procedure of the year (for example, Rev. Proc. 2015-1,

You must allocate tips among employees who receive them if

2015-1 I.R.B. 1, available at

the total tips reported to you during any payroll period are

pt03.html). This revenue procedure is updated annually as

less than 8% (or the approved lower rate) of this

the first revenue procedure of the year, but it may be

establishment's gross receipts for that period.

modified or amplified during the year. The user fees are

posted in Appendix A of the revenue procedure. Since the

Generally, the amount allocated is the difference between

taxpayer is requesting a determination letter, the payment for

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

the user fee must be submitted along with the petition for the

rate) of the gross receipts, other than nonallocable receipts.

rate reduction.

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

A majority of all the directly tipped employees must

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

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

petition to:

employees” means more than half of all directly tipped

employees employed by the establishment at the time the

Internal Revenue Service

petition is filed. Employee groups must follow the procedures

National Tip Reporting Compliance

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

3251 North Evergreen Dr. NE

Income; and Rev. Proc. 86-21.

Grand Rapids, MI 49525

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

rate is effective.

Don't mail Form 8027 to this address. See Where To

File, earlier.

Note. You must attach a copy of your “lower rate”

determination letter from the IRS when filing a paper Form

CAUTION

The burden of supplying sufficient information to allow the

8027. See Pub. 1239 for instructions on submitting a copy of

IRS to estimate with reasonable accuracy the actual tip rate

your “lower rate” determination letter from the IRS when filing

of the establishment rests with the petitioner. Your petition for

electronically.

a lower rate must clearly demonstrate that a rate less than

Reporting Allocated Tips to

8% should apply. It must include the following information.

Employer's name, address, and EIN.

Employees

Establishment's name, address, and establishment

Give each employee who has been allocated tips a Form

number.

W-2 that shows the allocated amount in box 8. Tip allocations

Detailed description of the establishment that would help

have no effect on withholding income tax, social security tax,

to determine the tip rate. The description should include the

or Medicare tax from employees’ wages. Allocated tips aren't

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

subject to withholding and must not be included in boxes 1,

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

3, 5, and 7 of Form W-2.

waitress, cashier, etc.) to whom the customer pays the

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

If you allocate tips among employees by the methods

and whether alcohol is available.

described later under the instructions for line 7, you aren't

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

liable to any employee if any amount is improperly allocated.

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

However, if the allocation shown on the employee’s Form

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

W-2 differs from the correct allocation by more than 5%, you

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

must correct that employee’s allocation. You must also

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

review the allocable amount of all other employees in the

charge.

same establishment to ensure that the error didn't distort any

Type of clientele.

other employee’s share by more than 5%.

Copy of a representative menu for each meal.

The petition must contain the following statement and be

You must furnish Form W-2 to employees by January 31

signed by a responsible person who is authorized to make

of the following year. If employment ends before the end of

and sign a return, statement, or other document.

the year and the employee asks for the Form W-2, a tip

allocation isn't required on the early Form W-2. See If you

furnished Form W-2 before the end of the year, later.

“Under penalties of perjury, I declare that I have

examined this petition, including accompanying

Correcting allocated tips reported on Form W-2 furnish-

ed to an employee in January. If you furnished Form W-2

documents, and to the best of my knowledge and

to an employee in January and later discover an error that

belief, the facts presented in support of this petition are

requires a correction (as discussed earlier), the method for

true, correct, and complete.”

making a correction depends on whether Form W-2 has

been filed with the Social Security Administration (SSA).

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

If you filed Form W-2 with the SSA. Use the current

any) filed for the 3 years before your petition. If you are

version of Form W-2c to report the corrected allocation on a

petitioning for more than one establishment or you want to

previously filed Form W-2.

know your appeal rights, see Rev. Proc. 86-21, 1986 1 C.B.

If you furnished Form W-2 to an employee but didn't

560 for additional information. Also include with your petition

file it with the SSA. Prepare a new Form W-2 with the

a check or money order made payable to the “United States

correct information and file Copy A with the SSA. Write

“Corrected” on the employee’s new copies (B, C, and 2), and

-3-

Instructions For Form 8027 (2015) Page 3

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