Instructions For Form 8027 - 2016 Page 7
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8Example for Line 7b. Gross Receipts Method
1. Enter amount from Form 8027, line 1
1.
. . . . . .
A large food or beverage establishment has gross receipts
2. Enter amount from Form 8027, line 2
2.
. . . . . .
for a payroll period of $100,000 and has tips reported for the
3. Divide line 1 by line 2, enter as a decimal (at least
payroll period of $6,200. Directly tipped employees reported
4 decimal places)
3.
. . . . . . . . . . . . . . . . . . .
$5,700, while indirectly tipped employees reported $500.
4. Enter amount from Form 8027, line 4c
4.
. . . . . .
5. Enter amount from Form 8027, line 5
5.
. . . . . .
Directly
Gross receipts
6. Divide line 4 by line 5, enter as a decimal (at least
tipped
for payroll
4 decimal places)
6.
. . . . . . . . . . . . . . . . . .
employees
period
Tips reported
7. Subtract line 6 from line 3; if zero or less, stop
7.
A
$18,000
$1,080
here
. . . . . . . . . . . . . . . . . . . . . . . . . . .
B
16,000
880
8. Potential unreported tips. Multiply line 7 by
8.
C
23,000
1,810
line 5
. . . . . . . . . . . . . . . . . . . . . . . . . .
D
17,000
800
E
12,000
450
F
14,000
680
Totals
$100,000
$5,700
Once you have completed the worksheet:
1.
$100,000 (gross receipts) x 0.08 = $8,000
If the entry on line 7 is zero or less, your employees are
2.
$8,000 - $500 (tips reported by indirectly tipped employees) =
$7,500
probably accurately reporting their tips; however,
If the entry on line 8 is greater than zero, depending on the
3.
Directly tipped
type of operation you have and whether or not you have
Directly
employees'
(Times)
Employee's
allocated tips, it is possible that your employees aren't
tipped
share of 8% of
Gross receipts
share of 8%
reporting all of their tip income to you.
employees
the gross
ratio
of gross
A
$7,500
18,000/100,000 =
$1,350
Another quick method to determine if your
B
$7,500
16,000/100,000 =
1,200
employees are properly reporting all of their tips to
TIP
C
$7,500
23,000/100,000 =
1,725
you is to compare the rate of tips reported on credit
D
$7,500
17,000/100,000 =
1,275
sales to the rate of tips reported on cash sales. For example,
E
$7,500
12,000/100,000 =
900
if line 3 in the worksheet greatly exceeds the rate determined
F
$7,500
14,000/100,000 =
1,050
from dividing reported cash tips by reportable cash receipts
Total
$7,500
(that is, total cash receipts less nonallocable cash receipts),
4.
Directly
Employee's
some of your employees may not be reporting all of their tips
tipped
share of 8% of
(Minus)
Employee
to you and you generally should be showing an amount on
employees
the gross
Tips reported
shortfall
line 7 (“Allocation of tips”) of Form 8027.
A
$1,350
$1,080 =
$270
B
$1,200
880 =
320
Need Help?
C
$1,725
1,810 =
–
D
$1,275
800 =
475
If it appears that not all tips are being reported to you, the IRS
E
$ 900
450 =
450
offers a service called the Tip Rate Determination &
F
$1,050
680 =
370
Education Program. This program can assist you, the
Total shortfall
$1,885
employer, in implementing more effective methods of tip
5.
$8,000 less $6,200 (total tips reported) = $1,800 (amount allocable
income reporting. The program also offers assistance in
among employees who had a shortfall)
educating tipped employees concerning their obligations
6.
Shortfall
Allocable
(Times)
Amount of
relating to the reporting of any tip income they receive. To
employees
amount
Shortfall ratio
allocation
find out more about this program or to participate in a
A
$1,800
$270/1,885 =
$258
voluntary tip compliance agreement, visit IRS.gov and type
B
$1,800
320/1,885 =
306
“restaurant” in the search box. You may also send an email to
D
$1,800
475/1,885 =
454
TIP.Program@irs.gov
and request information on this
E
$1,800
450/1,885 =
430
program.
F
$1,800
370/1,885 =
353
An information reporting customer service section is
Since employee C has no shortfall, there is no allocation to C.
available to answer questions about reporting on Forms
8027, W-2, W-3, 1099, and other information returns. If you
have questions about reporting on information returns, call:
In this example, the total amount of allocation is
1-866-455-7438 (toll free),
$1,800 resulting from the rounding off to whole
TIP
304-263-8700 (toll call), or
numbers.
304-579-4827 (TDD/TTY for persons who are deaf, hard
Employer's Optional Worksheet
of hearing, or have a speech disability).
for Tipped Employees
You can also reach the center by email at mccirp@irs.gov.
Don't include tax identification numbers (TINs) or
Unreported tip income can lead to additional employer
attachments in email correspondence because it isn't secure.
liability for social security tax and Medicare tax. As a means
of determining if your employees are reporting all of their tips
Privacy Act and Paperwork Reduction Act Notice. We
to you, please take a few minutes to voluntarily complete the
ask for the information on this form to carry out the Internal
following worksheet. Completing this worksheet is only for
Revenue laws of the United States. You're required to give us
the employer's information (don't send it to the IRS).
the information. We need it to ensure that you're complying
-7-
Instructions for Form 8027 (2016)
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