Instructions For Form 8027 - 2016 (Page 5 of 8) in pdf

Line 3. Total Amount of Service Charges of Less

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

purposes only. Using this rate doesn't mean that

Than 10% Paid as Wages to Employees

directly tipped employees must report only 8%. All

Enter the total amount of service charges of less than 10%

CAUTION

directly tipped employees and indirectly tipped employees

that have been added to customers' bills and have been

must report the actual amount of tips they receive.

distributed to your employees for the year.

If you have allocated tips using other than the

Line 4a. Total Tips Reported by Indirectly

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

TIP

Tipped Employees

amount of allocated tips (if any) from your records

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

Enter the total amount of tips reported for the year by

time period for which wages were paid or allocated on a

indirectly tipped employees, such as cooks, bussers, and

quarterly basis.

service bartenders. Indirectly tipped employees generally

receive their tips from other tipped employees and not

directly from the customer.

Line 7. Allocation of Tips

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

Line 4b. Total Tips Reported by Directly Tipped

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

Employees

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

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

There are three methods by which you may allocate tips.

tipped employees, such as bartenders and waitstaff. Directly

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

tipped employees receive tips directly from customers.

Line 7a. Hours-Worked Method

Line 4c. Total Tips Reported

Establishments that employ fewer than the equivalent of 25

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

full-time employees (both tipped and nontipped employees)

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

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

allocate tips. You will be considered to have employed fewer

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

Line 4a

period if the average number of employee hours worked

+ Line 4b

(both tipped and nontipped employees) per business day

Line 4c

during a payroll period is less than 200 hours.

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

In figuring the tips you should report for 2016, don't

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

include tips received by employees in December

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

2015, but not reported until January 2016. However,

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

CAUTION

include tips received by employees in December 2016, but

of hours worked by each employee who is tipped directly,

not reported until January 2017.

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

hours worked by all employees who are directly tipped for the

Line 5. Gross Receipts From Food and

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

Beverages

for details.

Enter the total gross receipts from the provision of food and

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

beverages for this establishment for the year. See Gross

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

Receipts, earlier, for an explanation of what's included in

nontipped) hours worked per business day during the payroll

gross receipts.

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

you must use the payroll period in which the greatest number

If you don't charge separately for providing food and

of workers (both tipped and nontipped) were employed.

beverages along with other goods or services (such as a

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

Line 7b. Gross Receipts Method

estimate of the gross receipts from the food and beverages.

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

This estimate must reflect the cost to the employer for

payroll period, you must allocate the difference between total

providing the food and beverages plus a reasonable profit

tips reported and 8% of gross receipts using the gross

factor.

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

Line 6

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

later).

Enter the result of multiplying line 5 by 8% (0.08) or a lower

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

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

IRS).

nonallocable receipts) for the payroll period by 8% (0.08) or

the approved lower rate.

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

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

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

amount of tips reported by employees who were tipped

you file Form 8027 electronically, see Pub. 1239 for

indirectly for the payroll period. This difference is the directly

instructions on submitting a copy of the IRS determination

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

letter.

gross receipts of the establishment. Indirectly tipped

employees don't receive tips directly from customers.

Examples are bussers, service bartenders, and cooks.

Directly tipped employees, such as waitstaff and bartenders,

receive tips directly from customers. Employees, such as

-5-

Instructions for Form 8027 (2016)

Instructions For Form 8027 - 2016 Page 5

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