Instructions For Form 8027 - 2016 Page 6


maitre d's, who receive tips directly from customers and
categories affected by the agreement when it is revoked. The
indirectly through tip splitting or pooling, are treated as
revocation is effective only at the beginning of a payroll
directly tipped employees.
3. For each employee who is tipped directly, multiply the
Keep a copy of the good-faith agreement for your records.
result in step 2 by the following fraction: the numerator (top
number) is the amount of the establishment's gross receipts
Line 8. Total Number of Directly Tipped
attributable to the employee, and the denominator (bottom
number) is the gross receipts attributable to all directly tipped
Enter the total number of directly tipped employees who
employees. The result is each directly tipped employee's
worked at the establishment during 2016. This is the
share of 8% (or the lower rate) of the gross receipts for the
cumulative total of all directly tipped employees who worked
payroll period.
at the establishment at any time during the year. If you have a
4. From each directly tipped employee's share of 8% (or
large turnover of directly tipped employees, this number may
the lower rate) of the gross receipts figured in step 3, subtract
be large. Don't use this number to determine if you must file
the tips the employee reported for the payroll period. The
Form 8027. Instead, see the Worksheet for Determining if
result is each directly tipped employee's shortfall (if any) for
You Must File Form 8027 for Calendar Year 2016, earlier.
the period.
5. From the amount figured in step 1, subtract the total
tips reported by both directly and indirectly tipped
Sign your name and include your title. Then enter the date
employees. The result is the amount that has to be allocated
signed and the best daytime telephone number where the
among the directly tipped employees who had a shortfall for
IRS can reach you, including area code.
the payroll period as figured in step 4.
Who Must Sign
6. For each directly tipped employee who had a shortfall
for the period as figured in step 4, multiply the amount in step
The following persons are authorized to sign the return for
5 by the following fraction: the numerator is the employee's
each type of business entity.
shortfall (figured in step 4), and the denominator is the total
• Sole proprietorship. The individual who owns the
shortfall of all directly tipped employees. The result is the
amount of allocated tips for each directly tipped employee.
• Corporation (including a limited liability company
Line 7c. Good-Faith Agreement
(LLC) treated as a corporation). The president, vice
president, or other principal officer duly authorized to sign.
An allocation can be made under a good-faith agreement.
This is a written agreement between you and at least
• Partnership (including an LLC treated as a partner-
two-thirds of the employees of each occupational category of
ship) or unincorporated organization. A responsible and
employees who receive tips (for example, waitstaff, bussers,
duly authorized member, partner, or officer having
and maitre d's) working in the establishment when the
knowledge of its affairs.
agreement is adopted. The agreement must:
• Single-member LLC treated as a disregarded entity for
1. Provide for an allocation of the difference between
federal income tax purposes. The owner of the LLC or
total tips reported and 8% (or the lower rate) of gross receipts
principal officer duly authorized to sign.
among employees who receive tips that approximates the
actual distribution of tip income among the employees;
• Trust or estate. The fiduciary.
2. Be effective the first day of a payroll period that begins
Form 8027 may also be signed by a duly authorized agent
after the date the agreement is adopted, but no later than
of the taxpayer if a valid power of attorney has been filed.
January 1 of the next year;
Alternative signature method. Corporate officers or duly
3. Be adopted when there are employees in each
authorized agents may sign Form 8027 by rubber stamp,
occupational category who would be affected by the
mechanical device, or computer software program. For
agreement; and
details and required documentation, see Rev. Proc. 2005-39,
2005-28 I.R.B. 82, available at
4. Allow for revocation by a written agreement adopted
by at least two-thirds of the employees in occupational
Instructions for Form 8027 (2016)


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