Instructions For Form 8027 - 2016 (Page 3 of 8) in pdf

receipts because the receipts of the bar or restaurant would

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

be included in the amount on line 5. You wouldn't have to

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

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

petitioning for more than one establishment or you want to

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

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

560, for additional information. Also include with your petition

Allocation of Tips

a check or money order made payable to “United States

Treasury” for the amount of the user fee required for

You must allocate tips among employees who receive them if

determination letters.

the total tips reported to you during any payroll period are

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

For the current user fee amount, consult the first revenue

establishment's gross receipts for that period. The allocation

procedure of the year (for example, Rev. Proc. 2016-1,

is made to each directly tipped employee performing

2016-1 I.R.B. 1, available at

services for the establishment who has a reporting shortfall

ar07.html). This revenue procedure is updated annually as

for the payroll period. No allocation is made to indirectly

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

tipped employees.

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 employer identification

Employees

number (EIN).

Give each employee who has been allocated tips a Form

Establishment's name, address, and establishment

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

number.

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

Detailed description of the establishment that would help

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

to determine the tip rate. The description should include the

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

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

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

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

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

If you allocate tips among employees by the methods

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

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

and whether alcohol is available.

liable to any employee if any amount is improperly allocated.

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

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

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

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

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

must correct that employee’s allocation. You must also

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

review the allocable amount of all other employees in the

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

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

charge.

other employee’s share by more than 5%.

Type of clientele.

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

Copy of a representative menu for each meal.

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

The petition must contain the following statement and be

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

signed by a responsible person who is authorized to make

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

and sign a return, statement, or other document.

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

Correcting allocated tips reported on Form W-2 furnish-

“Under penalties of perjury, I declare that I have

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

examined this petition, including accompanying

to an employee in January and later discover an error that

documents, and to the best of my knowledge and

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

belief, the facts presented in support of this petition are

making a correction depends on whether Form W-2 has

true, correct, and complete.”

been filed with the Social Security Administration (SSA).

-3-

Instructions for Form 8027 (2016)

Instructions For Form 8027 - 2016 Page 3

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