Instructions For Form 8027 (2015) (Page 5 of 8) in pdf

Line 4a. Total Tips Reported by Indirectly

Line 7. Allocation of Tips

Tipped Employees

If the amount shown on line 6 is more than the amount of tips

reported by your employees on line 4c, you must allocate the

Enter the total amount of tips reported for the year by

excess to those employees. Enter the excess on line 7.

indirectly tipped employees, such as cooks, bussers, and

There are three methods by which you may allocate tips.

service bartenders. Indirectly tipped employees generally

Check the box on line 7a, 7b, or 7c to show the method used.

receive their tips from other tipped employees and not

directly from the customer.

Line 7a. Hours-Worked Method

Line 4b. Total Tips Reported by Directly Tipped

Establishments that employ fewer than the equivalent of 25

Employees

full-time employees (both tipped and nontipped employees)

during a payroll period may use the hours-worked method to

Enter the total amount of tips reported for the year by directly

allocate tips. You will be considered to have employed fewer

tipped employees, such as bartenders and waitstaff. Directly

than the equivalent of 25 full-time employees during a payroll

tipped employees receive tips directly from customers.

period if the average number of employee hours worked

(both tipped and nontipped employees) per business day

Line 4c. Total Tips Reported

during a payroll period is less than 200 hours.

Add the amounts on lines 4a and 4b and enter the result on

To allocate tips by the hours-worked method, follow the

line 4c. This amount can't be a negative amount.

steps explained in Line 7b. Gross Receipts Method below.

However, for the fraction in step 3 of the gross receipts

Line 4a

method, substitute in the numerator (top number) the number

+ Line 4b

of hours worked by each employee who is tipped directly,

Line 4c

and in the denominator (bottom number) the total number of

hours worked by all employees who are directly tipped for the

payroll period. See Regulations section 31.6053-3(f)(1)(iv)

In figuring the tips you should report for 2015, don't

for details.

include tips received by employees in December

If you use the hours-worked method, be sure to enter on

2014, but not reported until January 2015. However,

CAUTION

line 7a the average number of employee (both tipped and

include tips received by employees in December 2015, but

nontipped) hours worked per business day during the payroll

not reported until January 2016.

period. If the establishment has more than one payroll period,

you must use the payroll period in which the greatest number

Line 5. Gross Receipts From Food and

of workers (both tipped and nontipped) were employed.

Beverages

Line 7b. Gross Receipts Method

Enter the total gross receipts from the provision of food and

beverages for this establishment for the year.

If no good-faith agreement (as explained later) applies to the

payroll period, you must allocate the difference between total

If you don't charge separately for providing food and

tips reported and 8% of gross receipts using the gross

beverages along with other goods or services (such as a

receipts method (or hours-worked method (line 7a)) as

package deal for food and lodging), make a good-faith

follows (see Example for Line 7b. Gross Receipts Method,

estimate of the gross receipts from the food and beverages.

later).

This estimate must reflect the cost to the employer for

1. Multiply the establishment's gross receipts (other than

providing the food and beverages plus a reasonable profit

nonallocable receipts) for the payroll period by 8% (.08) or

factor.

the approved lower rate.

Line 6

2. Subtract from the amount figured in step 1 the total

Enter the result of multiplying line 5 by 8% (.08) or a lower

amount of tips reported by employees who were tipped

rate (if the establishment was granted a lower rate by the

indirectly for the payroll period. This difference is the directly

IRS).

tipped employees' total share of 8% (or the lower rate) of the

gross receipts of the establishment. Indirectly tipped

If a lower rate was granted, write the rate in the space

employees don't receive tips directly from customers.

provided and attach a copy of the IRS determination letter. If

Examples are bussers, service bartenders, and cooks.

you file Form 8027 electronically, see Pub. 1239 for

Directly tipped employees, such as waitstaff and bartenders,

instructions on submitting a copy of the IRS determination

receive tips directly from customers. Employees, such as

letter.

maitre d's, who receive tips directly from customers and

indirectly through tip splitting or pooling, are treated as

The 8% rate (or lower rate) is used for tip allocation

directly tipped employees.

purposes only. Using this rate doesn't mean that

directly tipped employees must report only 8%. All

3. For each employee who is tipped directly, multiply the

CAUTION

directly tipped employees and indirectly tipped employees

result in step 2 by the following fraction: the numerator (top

must report the actual amount of tips they receive.

number) is the amount of the establishment's gross receipts

attributable to the employee, and the denominator (bottom

If you have allocated tips using other than the

number) is the gross receipts attributable to all directly tipped

calendar year, put an “X” on line 6 and enter the

employees. The result is each directly tipped employee's

TIP

amount of allocated tips (if any) from your records

share of 8% (or the lower rate) of the gross receipts for the

on line 7. This may occur if you allocated tips based on the

payroll period.

time period for which wages were paid or allocated on a

4. From each directly tipped employee's share of 8% or

quarterly basis.

the lower rate of the gross receipts figured in step 3, subtract

-5-

Instructions For Form 8027 (2015) Page 5

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