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Department of the Treasury
Internal Revenue Service
2024

Instructions for Form 8027

Employer's Annual Information Return of Tip Income and Allocated Tips

Section references are to the Internal Revenue Code remain certified under the certification program, CPEOs
unless otherwise noted. must meet various requirements described in sections
3511 and 7705 and related published guidance. A CPEO
Future Developments is generally treated for employment tax purposes as the
employer of any individual who performs services for a
For the latest information about developments related to customer of the CPEO and is covered by a contract
Form 8027 and its instructions, such as legislation described in section 7705(e)(2) between the CPEO and
enacted after they were published, go to IRS.gov/ the customer (CPEO contract), but only for wages and
Form8027. other compensation paid to the individual by the CPEO.
For purposes of Form 8027, the customer for whom a
Reminders work site employee performs services (that is, the
• You must check either the “Yes” or “No” box under the employer who operates a large food or beverage
employer's name and address to indicate whether or not establishment) is considered the employer and must file
the establishment accepts credit cards, debit cards, or Form 8027. The CPEO must furnish to the customer any
other charges. If the “Yes” box is checked, lines 1 and 2 of information necessary to complete this form.
Form 8027 must be completed, and you must enter an For more information about CPEOs, go to IRS.gov/
amount, even if zero, on lines 1 and 2. Also see the CPEO. Also see Rev. Proc. 2023-18, 2023-13 I.R.B. 605,
instructions for lines and .1 2 available at IRS.gov/irb/2023-13_IRB#REV-
• You can complete the optional Worksheet for PROC-2023-18.
Determining if You Must File Form 8027 for Calendar Year
2024, later, to determine if you must file Form 8027.
• You may want to use the Employer's Optional General Instructions

Worksheet for Tipped Employees, later, as a means of Purpose of Form
determining if your employees are reporting all of their tip
income to you. Employers must annually report to the IRS receipts and
• For information about the credit for employer social tips from their large food or beverage establishments.
security and Medicare taxes paid on certain employee Employers use Form 8027 to report that information. In
tips, see Form 8846. Also see section 6 of Pub. 15 for addition, employers use Form 8027 to determine allocated
more information about tips. tips for tipped employees.
• You can advise your employees to see Pub. 531 or use These instructions give you some background
the IRS Interactive Tax Assistant at IRS.gov/TipIncome for information about Form 8027. They tell you who must file
help in determining if their tip income is taxable and for Form 8027, when and where to file it, and how to fill it out
information about how to report tip income. line by line.
Electronic filing. If you're required to file 10 or more All employees receiving $20 or more a month in
information returns during the year, you must file the forms TIP cash tips must report 100% of their tips to you in a
electronically. Information returns are filed electronically written report. Cash tips include tips paid by cash,
through the Filing Information Returns Electronically check, debit card, and credit card. The report should
(FIRE) system. Go to IRS.gov/FIRE for more information. include tips you paid over to the employee for charge
See Pub. 1239 for more information about filing Form customers, tips the employee received directly from
8027 electronically. We encourage you to file electronically customers, and tips received from other employees under
even if you're not required to file 10 or more information any tip-sharing arrangement.
returns.
Recordkeeping. You must keep records to substantiate Who Must File
any information returns, employer statements to You must file Form 8027 if you're an employer who
employees, or tip allocations. The records must be kept operates a large food or beverage establishment.
for 3 years after the due date of the return or statement to
A large food or beverage establishment is a food or
which they relate.
beverage operation:
Certified professional employer organizations • That is located in the 50 states or in the District of
(CPEOs). The Stephen Beck, Jr., ABLE Act of 2014 Columbia,
required the IRS to establish a voluntary certification • Where tipping of food or beverage employees by
program for professional employer organizations (PEOs). customers is customary, and
PEOs handle various payroll administration and tax • Whose employer normally employed more than 10
reporting responsibilities for their business clients and are employees on a typical business day during the preceding
typically paid a fee based on payroll costs. To become and calendar year. We call this the 10-employee test. To

Sep 6, 2024 Cat. No. 61013P

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determine if you meet the 10-employee test, see include, but aren't limited to, coat check persons,
Worksheet for Determining if You Must File Form 8027 for bellhops, and doormen.
Calendar Year 2024, later.
Worksheet for Determining if You Must File Form
Food or beverage operation. A food or beverage
8027 for Calendar Year 2024
operation is any business activity that provides food or
beverages for consumption on the premises, other than You can complete the optional worksheet to determine if
fast food operations. An operation is a fast food operation you had more than 10 employees on a typical business
only if its customers order, pick up, and pay for food or day during 2023 and, therefore, must file Form 8027 for
beverages at a counter or window and then carry the food 2024. It is the average number of employee hours
or beverages to another location (either on or off the worked on a typical business day that determines
premises). Some people call food or beverage operations whether or not you employed more than 10 employees.
venues, stores, rooms, outlets, or cost centers. Completing this worksheet is only for the employer's
information (don't send it to the IRS).
If you provide food or beverages at more than one
location, the activity at each separate location is You must consider the following when completing the
considered to be a separate food or beverage operation worksheet.
and a separate Form 8027 is filed for each location. You • Include employees at all of your food or beverage
could also have more than one food or beverage operation operations, even if an individual operation has fewer than
within a single building. Each activity conducted within a 10 employees.
single building is treated as a separate location if the • Include all employees at your food or beverage
customers of the activity, while being provided with food or operations, not just food or beverage employees.
beverages, occupy an area separate from that occupied • Don't include employees at fast food operations.
by customers of other activities and the gross receipts • Don't apply the 10-employee test separately to each
from the activity are recorded separately. For example, a food or beverage operation.
gourmet restaurant, a coffee shop, and a cocktail lounge • Don't consider anyone who owns 50% or more in value
in a hotel would each be treated as a separate food or of the stock of a corporation as an employee for the
beverage operation if gross receipts from each activity are 10-employee test. See Regulations section 31.6053-3(j)
recorded separately. In addition, an employer may treat (9) for more information.
different activities conducted in the identical place at
different times as separate food or beverage operations if 1. Enter one-half of the total employee hours worked
the gross receipts of the activities at each time are during the month in 2023 with the greatest
recorded separately. For example, a restaurant may aggregate gross receipts from food and
record the gross receipts from its cafeteria-style lunch beverages . . . . . . . . . . . . . . . . . . . . . . . .
operation separately from the gross receipts of its 2. Enter the number of days opened for business
full-service food or beverage operations. during the month used for line 1 . . . . . . . . . . .
Tipping of food or beverage employees by custom- 3. Enter one-half of the total employee hours worked
during the month in 2023 with the least aggregate
ers is customary. Generally, tipping isn't considered gross receipts from food and beverages. . . . . .
customary in a cafeteria-style operation or if at least 95%
of total sales (other than carryout) had a service charge of 4. Enter the number of days opened for business
during the month used for line 3 . . . . . . . . . . .
10% or more. See Regulations section 31.6053-3(j)(7)
and (18) for more information. If tipping isn't considered 5. Divide line 1 by line 2 . . . . . . . . . . . . . . . . .
customary, the food or beverage operation isn't a large 6. Divide line 3 by line 4 . . . . . . . . . . . . . . . . .
food or beverage establishment. Service charges aren't
7. Add lines 5 and 6. If line 7 is greater than 80 (hours),
tips; see Difference Between Service Charges and Tips, you must file Form 8027 for 2024 . . . . . . . . . .
later.
Example. Good Food Restaurant is a soup-and-salad
specialty business. Customers select food items at a If your answer on line 7 of the worksheet is more than
buffet. They then pay and take their trays to tables. The 80 hours, then you meet the 10-employee test.
restaurant employees clear the tables but may also help
the customers if they need anything extra. Customers Example. Oak Co. operates five restaurants in the
rarely leave a tip. Thus, tipping isn't customary at Good Midwest. Those working at the restaurants include food or
Food Restaurant. Therefore, Good Food Restaurant isn't a beverage employees, coat check employees, and parking
large food or beverage establishment and a Form 8027 valet employees. Oak Co. must count all the employees
isn't required. working at all five of Oak Co.'s restaurants, and not just
the food or beverage employees, to determine the
Food or beverage employee. A food or beverage 10-employee test. Oak Co. must not figure the
employee is an employee who provides services in 10-employee test separately for each operation.
connection with the provision of food or beverages. These
Example. Rose Casino includes a fine dining
employees include, but aren't limited to, waitstaff, bussers,
restaurant, a café, a bar, and a dinner showroom. Rose
bartenders, persons in charge of seating (such as a maitre
Casino must count all employees at all these food or
d'), wine stewards, cooks, and kitchen help. Examples of
beverage operations for the 10-employee test, including
employees who aren't food or beverage employees
the managers of the operations as well as the food or

2 Instructions for Form 8027 (2024)

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beverage employees. Rose Casino must not figure the Department of the Treasury
10-employee test separately for each operation. Internal Revenue Service
Ogden, UT 84201
If you meet the 10-employee test, file a separate
! Form 8027 for each food or beverage operation
CAUTION where tipping is customary. This is true even if an Form 8027 attachments if filing on paper. If
individual operation, when considered separately, doesn't applicable, attach a copy of your timely filed Form 8809,
have more than 10 employees on a typical business day. and a copy of your “lower rate” determination letter from
the IRS. If you filed Form 8508, Application for a Waiver
Example. Continuing with the previous example, Rose from Electronic Filing of Information Returns, attach a
Casino meets the 10-employee test. All four of the food or copy of the approved waiver that you received. Don't
beverage operations meet the other tests, as they are attach any other documents.
located in the 50 states and tipping of food or beverage
Reporting and filing electronically. You may be
employees by customers is customary at each of the
required to file Forms 8027 electronically. For more
operations. Each of the four food or beverage activities
information, see Electronic filing, earlier.
records gross receipts separately, and customers of each
activity occupy an area separate from that occupied by
customers of the other activities. Because each activity Penalties
qualifies as a large food or beverage establishment, Rose The law provides for a penalty if you don't file Form 8027
Casino is required to file four Forms 8027 (a separate (and Form 8027-T, if applicable) on time unless you can
Form 8027 for the restaurant, the café, the bar, and the show reasonable cause for the delay. In addition, if you
showroom) even if an individual activity has less than 10 don't complete an accurate Form 8027, you won't be able
employees. to correctly prepare Form W-2, Wage and Tax Statement,
for each directly tipped employee for whom a tip allocation
If you're required to report for more than one was required to be made. You may be charged penalties
TIP establishment and you file Forms 8027 on paper, for each failure to:
you must complete and file Form 8027-T, • Timely file a correct information return (Forms 8027 and
Transmittal of Employer's Annual Information Return of Tip W-2), including failure to file electronically, if required; and
Income and Allocated Tips, with Forms 8027. Attach • Timely furnish a correct Form W-2 to the employee.
Forms 8027 in establishment number order (lowest to
highest). For more information on establishment numbers, For more information on penalties for untimely or
see Establishment Number, later. Form 8027-T isn't filed incorrect Forms W-2 or 8027, see the penalties sections in
with electronically filed Forms 8027. the General Instructions for Forms W-2 and W-3, and the
General Instructions for Certain Information Returns.
New business. You're a new business if you opened a
food or beverage operation during the year and you didn't Gross Receipts
operate any food or beverage operations during the On Form 8027, you must report your establishment’s
preceding calendar year. File Form 8027 for a new food or gross receipts from food and beverages you provide. You
beverage operation if, during any 2 consecutive calendar will use gross receipts to determine other amounts that
months, the average number of hours worked each you must report. Gross receipts include all receipts from
business day by all employees is more than 80 hours. To the provision of food or beverages (other than
figure the average number of employee hours worked nonallocable receipts, as defined later) from cash sales,
each business day during a month, divide the total hours charge receipts, charges to a hotel room (excluding tips
all employees worked during the month by the number of charged to the hotel room if your accounting procedures
days the operation was open for business. After the test is allow these tips to be separated), and the retail value of
met for 2 consecutive months, you must file a return complimentary food or beverages served to customers, as
covering the rest of the year, beginning with the next explained later.
payroll period.
Generally, tips aren't included in gross receipts.
When To File However, if you reduced your cash sales by the amount of
any cash you paid to tipped employees for any charged
File Form 8027 (and Form 8027-T when filing more than
tips due to them, then include those charged tips in your
one paper Form 8027) by February 28, 2025. However, if
gross receipts. Don't include state or local taxes in gross
you file electronically, the due date for Form 8027 is March
receipts. Don't include receipts from the sale of
31, 2025.
merchandise such as souvenirs, memorabilia, tee shirts,
Extension of time to file. Filers of Form 8027 submitted or glassware in gross receipts from food and beverages.
on paper or electronically may request an extension of
time to file on Form 8809. File Form 8809 as soon as you If you don't charge separately for providing food and
know an extension of time to file is necessary, but not beverages along with other goods or services (such as a
before January 1 of the filing year, and not later than package deal for food and lodging), make a good-faith
February 28, 2025 (March 31, 2025, if you file Forms 8027 estimate of the gross receipts from the food and
electronically). beverages. This estimate must reflect the cost to the
employer for providing the food and beverages plus a
Where To File reasonable profit factor.
If you file a paper return, mail Form 8027 to:

Instructions for Form 8027 (2024) 3

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Remind all directly and indirectly tipped Don't mail Form 8027 to this address. See Where
TIP employees to include all charged tips and all cash ! To File, earlier.
tips received in the tip amount that they must CAUTION
report to you. The burden of supplying sufficient information to allow
the IRS to estimate with reasonable accuracy the actual
Nonallocable receipts. These are receipts for carryout tip rate of the establishment rests with the petitioner. Your
sales and receipts with a service charge added of 10% or petition for a lower rate must clearly demonstrate that a
more. Carryout sales are sales of food or beverages for rate less than 8% should apply. It must include the
consumption off the premises of the establishment. Room following information.
service isn't a carryout sale. Nonallocable receipts Employer's name, address, and employer identification
•
generally include all sales on which tipping isn't number (EIN).
customary. Establishment's name, address, and establishment
•
Complimentary items. Food or beverages served to number.
customers without charge must be included in gross • Detailed description of the establishment that would
receipts if (a) tipping for providing them is customary at help to determine the tip rate. The description should
the establishment; and (b) they are provided in connection include the type of restaurant, days and hours of
with an activity that is engaged in for profit, whose receipts operation, type of service including any self-service, the
wouldn't be included in the amount on line 5 of Form 8027, person (waitstaff, cashier, etc.) to whom the customer
and whose receipts aren't nonallocable receipts that have pays the check, whether the check is paid before or after
a service charge of 10% or more added. the meal, and whether alcohol is available.
For example, you would have to include in gross • Past year's information shown on lines 1 through 6 of
receipts the retail value of the complimentary drinks Form 8027 as well as total carryout sales; total charge
served to customers in a gambling casino because tipping sales; percentage of sales for breakfast, lunch, and
is customary, the gambling casino is an activity engaged dinner; average dollar amount of a guest check; service
in for profit, and the gambling receipts of the casino aren't charge, if any, added to the check; and the percentage of
included in the amount on line 5. sales with a service charge.
• Type of clientele.
However, you wouldn't have to include the retail value
• Copy of a representative menu for each meal.
of complimentary hors d'oeuvres at your bar or a
complimentary dessert served to a regular patron of your An employer petition must contain the following
restaurant in gross receipts because the receipts of the statement and be signed by a responsible person who is
bar or restaurant would be included in the amount on authorized to make and sign a return, statement, or other
line 5. You wouldn't have to include the value of a fruit document.
basket placed in a hotel room in gross receipts because,
generally, tipping for it isn't customary. “Under penalties of perjury, I declare that I have
examined this petition, including accompanying
Allocation of Tips documents, and to the best of my knowledge and
You must allocate tips among employees who receive belief, the facts presented in support of this petition are
them if the total tips reported to you during any payroll true, correct, and complete.”
period are less than 8% (or the approved lower rate) of the
establishment's gross receipts for that period. The
allocation is made to each directly tipped employee For an employer petition, you must attach to the petition
performing services for the establishment who has a copies of Form 8027 (if any) filed for the 3 years before
reporting shortfall for the payroll period. No allocation is your petition. If you're petitioning for more than one
made to indirectly tipped employees. establishment or you want to know your appeal rights, see
Rev. Proc. 86-21, 1986-1 C.B. 560, for additional
Generally, the amount allocated is the difference information. Also, include with your petition a check or
between the total tips reported by employees and 8% (or money order made payable to “United States Treasury” for
the lower rate) of the gross receipts, other than the amount of the user fee required for determination
nonallocable receipts. letters.
There are three methods you may use to allocate tips. For the current user fee amount, consult the first
See the instructions for line 7, later, for a description of the revenue procedure of the year (for example, Rev. Proc.
three methods. 2023-1, 2023-01 I.R.B. 1, available at IRS.gov/irb/
Lower rate. You (or a majority of the employees) may 2023-01_IRB#REV-PROC-2023-1). This revenue
request a lower rate (but not lower than 2%) by submitting procedure is updated annually as the first revenue
a petition to: procedure of the year, but it may be modified or amplified
during the year. The user fees are posted in Appendix A of
Internal Revenue Service the revenue procedure. Because the taxpayer is
National Tip Reporting Compliance requesting a determination letter, the payment for the user
3251 North Evergreen Dr. NE fee must be submitted along with the petition for the rate
Grand Rapids, MI 49525 reduction.
A majority of all the directly tipped employees must
consent to any petition written by an employee. A “majority

4 Instructions for Form 8027 (2024)

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of employees” means more than half of all directly tipped the actual amount by more than 5%, prepare a new Form
employees employed by the establishment at the time the W-2 with the correct information and file Copy A with the
petition is filed. Employee groups must follow the SSA. Enter “Corrected” on the employee’s new copies (B,
procedures in Regulations section 31.6053-3(h); Pub. C, and 2) and furnish them to the employee during
531; and Rev. Proc. 86-21. January of the next year. Don't enter “Corrected” on Copy
The IRS will notify you when and for how long the A of the Form W-2 that you file with the SSA.
reduced rate is effective. Don't send Forms W-2 to the IRS. We use the
You must attach a copy of your “lower rate” ! information shown on the Forms W-2 that you file
CAUTION with the SSA.
! determination letter from the IRS when filing a
CAUTION paper Form 8027. See Pub. 1239 for instructions
on submitting a copy of your “lower rate” determination Difference Between Service Charges
letter from the IRS when filing electronically.
and Tips
Service charges are treated differently from tips for federal
Reporting Allocated Tips to tax purposes. Any portion of a service charge that is
Employees distributed to an employee is wages, and you must
Give each employee who has been allocated tips a Form withhold federal income tax, social security tax, and
W-2 that shows the allocated amount in box 8. Tip Medicare tax and include the amount on Form W-2 as
allocations have no effect on withholding income tax, wages. Service charges aren't reported as tips on Form
social security tax, or Medicare tax from employees’ 8027. You may be required to report service charges on
wages. Allocated tips aren't subject to withholding and line 3; see the instructions for line 3, later. To accurately
must not be included in boxes 1, 3, 5, and 7 of Form W-2. report and pay your taxes, you must correctly identify
amounts as either a tip or a service charge. Generally, an
If you allocate tips among employees by the methods amount is a tip if:
described later under the instructions for line 7, you're not • The payment is made free from compulsion,
liable to any employee if any amount is improperly • The customer has the unrestricted right to determine
allocated. However, if the allocation shown on the the amount (including zero),
employee’s Form W-2 differs from the correct allocation by • The payment isn't the subject of negotiation or dictated
more than 5%, you must correct that employee’s by employer policy, and
allocation. You must also review the allocable amount of • The customer has the right to determine who receives
all other employees in the same establishment to ensure the payment.
that the error didn't distort any other employee’s share by The absence of any of these factors creates a doubt as to
more than 5%. whether a payment is a tip and indicates that the payment
You must furnish Form W-2 to employees by January may be a service charge.
31 of the following year. If employment ends before the For additional information, including examples of both
end of the year and the employee asks for the Form W-2, service charges and tips, see Q&A 1 in Rev. Rul. 2012-18,
a tip allocation isn't required on the early Form W-2. See If 2012-26 I.R.B. 1032, available at IRS.gov/irb/
you furnished Form W-2 before the end of the year, later. 2012-26_IRB#RR-2012-18.
Correcting allocated tips reported on Form W-2 fur-
nished to an employee in January. If you furnished
Form W-2 to an employee in January and later discover Specific Instructions
an error that requires a correction (as discussed earlier), File a separate Form 8027 for each large food or beverage
the method for making a correction depends on whether establishment. Use Form 8027-T when filing more than
Form W-2 has been filed with the Social Security one paper Form 8027.
Administration (SSA).
If you filed Form W-2 with the SSA. Use the current Name and Address of Establishment
version of Form W-2c to report the corrected allocation
and Employer Identification Number
and correct the previously filed Form W-2.
If you furnished Form W-2 to an employee but Type or print the name and address of the establishment.
didn't file it with the SSA. Prepare a new Form W-2 with They may be different from your mailing address, as in the
the correct information and file Copy A with the SSA. Enter case of employers who have more than one
“Corrected” on the employee’s new copies (B, C, and 2), establishment. Enter the name by which your customers
and furnish them to the employee. Don't enter “Corrected” know you (your “doing business as” name). For example,
on Copy A of the Form W-2 that you file with the SSA. enter the name on the front of the building or the name of
the restaurant within the casino. The EIN should be the
If you furnished Form W-2 before the end of the year. same as the number on the Forms W-2 that you furnish to
You may include on the early Form W-2 the employee’s the employees and the Form 941 that you file to report
actual tip allocation or a good-faith estimate of the wages and taxes for employees working for the
allocation. Signify a good-faith estimate by entering establishment. However, if you use a CPEO, see Certified
“Estimate” next to the allocated amount in box 8 of the professional employer organizations, earlier.
Form W-2.
If you didn't include an allocation on the early Form W-2
or if the estimated allocation on the early form differs from

Instructions for Form 8027 (2024) 5

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Always be sure the EIN on the form you file exactly If you have to add two or more amounts to figure the
TIP matches the EIN that the IRS assigned to your amount to enter on a line, include cents when adding the
business. Don't use your social security number amounts and round off only the total.
on forms that ask for an EIN.
Line 1. Total Charged Tips for Calendar Year
If one of the following applies to you, check the 2024
appropriate box on the left side of the form to tell us which Enter the total amount of tips that are shown on charge
type of return you're filing. receipts for the year. Don't include service charges. See
• Amended return. Difference Between Service Charges and Tips, earlier. If
• Final return. you indicated that your establishment accepts credit
cards, debit cards, or other charges but have no amounts
Type of Establishment to report on line 1, enter zero.
Check the box (check only one box) on the form that best
describes the type of food or beverage establishment. Line 2. Total Charge Receipts Showing Charged
• An establishment that serves evening meals only (with Tips
or without alcoholic beverages).
Enter the total sales from the provision of food and
• An establishment that serves evening and other meals
beverages (other than nonallocable receipts, as defined
(with or without alcoholic beverages).
earlier) from charge receipts that had a charged tip
• An establishment that serves only meals other than
shown. Include credit card charges and other credit
evening meals (with or without alcoholic beverages).
arrangements and charges to a hotel room unless your
• An establishment that serves food, if at all, only as an
normal accounting practice consistently excludes charges
incidental part of the business of serving alcoholic
to a hotel room. Don't include any tips or any state or local
beverages.
taxes in the amounts reported. If you indicated that your
Employer's Name and Address establishment accepts credit cards, debit cards, or other
charges but have no amounts to report on line 2, enter
Enter the name and address of the entity or individual
zero.
whose EIN was provided earlier. If mail isn't delivered to
your street address, enter your P.O. box number. Enter Line 3. Total Amount of Service Charges of Less
foreign addresses as follows: city, province or state, and
Than 10% Paid as Wages to Employees
country. Don't abbreviate the name of the country.
Enter the total amount of service charges of less than 10%
Establishment Number that have been added to customers' bills and have been
Enter a five-digit number to identify the individual distributed to your employees for the year.
establishment that you're reporting under the same EIN.
Give each establishment a separate number and Line 4a. Total Tips Reported by Indirectly Tipped
complete a separate Form 8027 for each. For example, Employees
each establishment could be numbered consecutively, Enter the total amount of tips reported for the year by
starting with 00001. Once you assign a number to an indirectly tipped employees, such as cooks, bussers, and
establishment, always use the same number for that service bartenders. Indirectly tipped employees generally
establishment each year. If you close an establishment, receive their tips from other tipped employees and not
don't use the number you assigned to it for another directly from the customer.
establishment.
Line 4b. Total Tips Reported by Directly Tipped
Does This Establishment Accept Employees
Credit Cards, Debit Cards, or Other Enter the total amount of tips reported for the year by
directly tipped employees, such as bartenders and
Charges? waitstaff. Directly tipped employees receive tips directly
You must check either the “Yes” or “No” box to indicate from customers. Treat employees, such as maitre d's, who
whether or not the establishment accepts credit cards, receive tips directly from customers and indirectly through
debit cards, or other electronic settlement methods. If the tip splitting or pooling, as directly tipped employees.
“Yes” box is checked, lines 1 and 2 of Form 8027 must be
completed, and you must enter on lines 1 and 2 the Line 4c. Total Tips Reported
appropriate amounts shown on the charge receipts. See Add the amounts on lines 4a and 4b and enter the result
the instructions for lines and , later.1 2 on line 4c. This amount can't be a negative amount.
Lines 1 Through 8
Line 4a
Rounding Off to Whole Dollars + Line 4b
Line 4c
You may round off cents to whole dollars on your Form
8027. If you do round to whole dollars, you must round all
amounts. To round, drop amounts under 50 cents and
increase amounts from 50 to 99 cents to the next dollar.
For example, $1.39 becomes $1 and $2.50 becomes $3.

6 Instructions for Form 8027 (2024)

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In figuring the tips you should report for 2024, considered to have employed fewer than the equivalent of
! don't include tips received by employees in 25 full-time employees during a payroll period if the
CAUTION December 2023 but not reported until January average number of employee hours worked (both tipped
2024. However, include tips received by employees in and nontipped employees) per business day during a
December 2024 but not reported until January 2025. payroll period is less than 200 hours.
To allocate tips by the hours-worked method, follow the
Line 5. Gross Receipts From Food and steps explained under Line 7b. Gross Receipts Method,
Beverages later. However, for the fraction in step 3 of the gross
Enter the total gross receipts from the provision of food receipts method, substitute in the numerator (top number)
and beverages for the establishment for the year. See the number of hours worked by each employee who is
Gross Receipts, earlier, for an explanation of what's tipped directly, and in the denominator (bottom number)
included in gross receipts. the total number of hours worked by all employees who
are directly tipped for the payroll period. See Regulations
Line 6 section 31.6053-3(f)(1)(iv) for details.
Enter the result of multiplying line 5 by 8% (0.08) or a If you use the hours-worked method, be sure to enter
lower rate (if the establishment was granted a lower rate on line 7a the average number of employee (both tipped
by the IRS). and nontipped) hours worked per business day during the
If a lower rate was granted, enter the rate in the space payroll period. If the establishment has more than one
provided and attach a copy of the IRS determination letter. payroll period, you must use the payroll period in which
If you file Form 8027 electronically, see Pub. 1239 for the greatest number of workers (both tipped and
instructions on submitting a copy of the IRS determination nontipped) were employed.

letter. Line 7b. Gross Receipts Method
The 8% rate (or lower rate) is used for tip If no good-faith agreement (as explained later) applies to
! allocation purposes only. Using this rate doesn't the payroll period, you must allocate the difference
CAUTION mean that directly tipped employees must report between total tips reported and 8% of gross receipts using
only 8%. All directly tipped employees and indirectly the gross receipts method (or hours-worked method
tipped employees must report the actual amount of tips (line 7a)) as follows (see Example for Line 7b. Gross
they receive. Receipts Method, later).
You may allocate tips for the calendar year, annually, by The instructions that follow assume you have
payroll period, or by using any period that results in a TIP chosen to allocate tips by payroll period. However,
reasonable division of a calendar year, including biweekly, as described earlier in the instructions for line 6,
semimonthly, quarterly, etc. The method you choose will you may choose to allocate tips for the calendar year,
be effective for the entire calendar year. annually, or by using any period that results in a
reasonable division of a calendar year, including biweekly,
If you have allocated tips using other than the semimonthly, quarterly, etc.
TIP calendar year, put an “X” on line 6 and enter the
amount of allocated tips (if any) from your records 1. Multiply the establishment's gross receipts (other
on line 7. than nonallocable receipts) for the payroll period by 8%
(0.08) or the approved lower rate.
Line 7. Allocation of Tips 2. Subtract from the amount figured in step 1 the total
If the amount shown on line 6 is more than the amount of amount of tips reported by employees who were tipped
tips reported by your employees on line 4c, you must indirectly for the payroll period. This difference is the
allocate the excess to those employees. Enter the excess directly tipped employees' total share of 8% (or the lower
on line 7. This excess amount is reported on each rate) of the gross receipts of the establishment. Indirectly
employee's Form W-2 as described earlier under tipped employees don't receive tips directly from
Reporting Allocated Tips to Employees. If you previously customers. Examples are bussers, service bartenders,
filed Forms W-2 for employees that didn't include accurate and cooks. Directly tipped employees, such as waitstaff
tip allocations, you may be required to file Forms W-2c. and bartenders, receive tips directly from customers.
For more information, see Correcting allocated tips Employees, such as maitre d's, who receive tips directly
reported on Form W-2 furnished to an employee in from customers and indirectly through tip splitting or
January, earlier. If the amount on line 4c is more than the pooling, are treated as directly tipped employees.
amount on line 6, you don't need to make a tip allocation. 3. For each employee who is tipped directly, multiply
There are three methods by which you may allocate the result in step 2 by the following fraction: the numerator
tips. Check the box on line 7a, 7b, or 7c to show the (top number) is the amount of the establishment's gross
method used. receipts attributable to the employee, and the
denominator (bottom number) is the gross receipts
Line 7a. Hours-Worked Method attributable to all directly tipped employees. The result is
Establishments that employ fewer than the equivalent of each directly tipped employee's share of 8% (or the lower
25 full-time employees (both tipped and nontipped rate) of the gross receipts for the payroll period.
employees) during a payroll period may use the 4. From each directly tipped employee's share of 8%
hours-worked method to allocate tips. You will be (or the lower rate) of the gross receipts figured in step 3,

Instructions for Form 8027 (2024) 7

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subtract the tips the employee reported for the payroll • Sole proprietorship—The individual who owns the
period. The result is each directly tipped employee's business.
shortfall (if any) for the period.
• Corporation (including a limited liability company
5. From the amount figured in step 1, subtract the total
(LLC) treated as a corporation—The president, vice
tips reported by both directly and indirectly tipped
president, or other principal officer duly authorized to sign.
employees. The result is the amount that has to be
allocated among the directly tipped employees who had a • Partnership (including an LLC treated as a partner-
shortfall for the payroll period as figured in step 4. ship) or unincorporated organization—A responsible
6. For each directly tipped employee who had a and duly authorized member, partner, or officer having
shortfall for the period as figured in step 4, multiply the knowledge of its affairs.
amount in step 5 by the following fraction: the numerator is • Single-member LLC treated as a disregarded entity
the employee's shortfall (figured in step 4), and the for federal income tax purposes—The owner of the
denominator is the total shortfall of all directly tipped LLC or principal officer duly authorized to sign.
employees. The result is the amount of allocated tips for
• Trust or estate—The fiduciary.
each directly tipped employee.
Form 8027 may also be signed by a duly authorized
Line 7c. Good-Faith Agreement agent of the taxpayer if a valid power of attorney has been
An allocation can be made under a good-faith agreement. filed.
This is a written agreement between you and at least Alternative signature method. Corporate officers or
two-thirds of the tipped employees of each occupational duly authorized agents may sign Form 8027 by rubber
category (for example, waitstaff, bussers, and maitre d's) stamp, mechanical device, or computer software program.
working in the establishment when the agreement is For details and required documentation, see Rev. Proc.
adopted. The agreement must: 2005-39, 2005-28 I.R.B. 82, available at IRS.gov/irb/
1. Provide for an allocation of the difference between 2005-28_IRB#RP-2005-39.
total tips reported and 8% (or the lower rate) of gross
receipts among tipped employees that approximates the Example for Line 7b. Gross Receipts Method
actual distribution of tip income among the employees; A large food or beverage establishment has chosen to
2. Be effective the first day of a payroll period that make tip allocations using its actual payroll period. It has
begins after the date the agreement is adopted, but no gross receipts for a payroll period of $100,000 and has
later than January 1 of the next year; tips reported for the payroll period of $6,200. Directly
tipped employees reported $5,700, while indirectly tipped
3. Be adopted when there are tipped employees in employees reported $500.
each occupational category who would be affected by the
agreement; and
4. Allow for revocation by a written agreement adopted
by at least two-thirds of the tipped employees in
occupational categories affected by the agreement when
it is revoked. The revocation is effective only at the
beginning of a payroll period.
Keep a copy of the good-faith agreement for your
records.

Line 8. Total Number of Directly Tipped
Employees
Enter the total number of directly tipped employees who
worked at the establishment during 2024. This is the
cumulative total of all directly tipped employees who
worked at the establishment at any time during the year. If
you have a large turnover of directly tipped employees,
this number may be large. Don't use this number to
determine if you must file Form 8027. Instead, see
Worksheet for Determining if You Must File Form 8027 for
Calendar Year 2024, earlier.

Signature
Sign your name and include your title. Then, enter the
date signed and the best daytime telephone number
where the IRS can reach you, including area code.

Who Must Sign
The following persons are authorized to sign the return for
each type of business entity.

8 Instructions for Form 8027 (2024)

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    Directly  Gross receipts                                             1. Enter amount from Form 8027, line 1          . . . . . .   1.  
    tipped           for payroll                                         2. Enter amount from Form 8027, line 2          . . . . . .   2.  
    employees        period       Tips reported
                                                                         3. Divide line 1 by line 2, enter as a decimal (at least 
    A                $18,000                  $1,080                        4 decimal places). . . . . . . . . . . . . . . . . . .     3.  
    B                16,000                    880                       4. Enter amount from Form 8027, line 4c . . . . . .           4.  
    C                 23,000                  1,810
    D                 17,000                  800                        5. Enter amount from Form 8027, line 5          . . . . . .   5.  
    E                 12,000                  450                        6. Divide line 4 by line 5, enter as a decimal (at least 
    F                 14,000                  680                           4 decimal places)    . . . . . . . . . . . . . . . . . .   6.  
    Totals           $100,000                 $5,700                     7. Subtract line 6 from line 3; if zero or less, stop             
1. $100,000 (gross receipts) x 0.08 = $8,000                                here . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
2. $8,000 − $500 (tips reported by indirectly tipped employees) =        8. Potential unreported tips. Multiply line 7 by                  
   $7,500                                                                   line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
3.            Directly tipped 
    Directly         employees'   (Times)             Employee's 
    tipped    share of 8% of  Gross receipts          share of 8% 
    employees        the gross         ratio          of gross           Once you have completed the worksheet: 
    A                $7,500  18,000/100,000 =                     $1,350 • If the entry on line 7 is zero or less, your employees are 
    B                7,500  16,000/100,000 =                      1,200  probably accurately reporting their tips; however,
    C                7,500  23,000/100,000 =                      1,725
    D                7,500  17,000/100,000 =                      1,275  • If the entry on line 8 is greater than zero, depending on 
    E                7,500  12,000/100,000 =                       900   the type of operation you have, it is possible that your 
    F                7,500  14,000/100,000 =                       1,050 employees aren't reporting all of their tip income to you.
                                              Total               $7,500     Another quick method to determine if your 
4.  Directly         Employee's                                          TIP employees are properly reporting all of their tips to 
    tipped    share of 8% of      (Minus)             Employee               you is to compare the rate of tips reported on 
    employees        the gross   Tips reported        shortfall          credit sales to the rate of tips reported on cash sales. For 
    A                $1,350                  $1,080 =             $270   example, if line 3 in the worksheet greatly exceeds the rate 
    B                1,200                    880 =               320    determined from dividing reported cash tips by reportable 
    C                1,725                    1,810 =              – 
    D                1,275                    800 =               475    cash receipts (that is, total cash receipts less nonallocable 
    E                900                      450 =               450    cash receipts), some of your employees may not be 
    F                1,050                    680 =               370    reporting all of their tips to you and you should generally 
                                  Total shortfall                 $1,885 be showing an amount on line 7 (“Allocation of tips”) of 
5. $8,000 less $6,200 (total tips reported) = $1,800 (amount allocable   Form 8027.
   among employees who had a shortfall)
6.  Shortfall        Allocable               (Times)  Amount of          Do You Need Help?
    employees        amount       Shortfall ratio     allocation
                                                                         If it appears that not all tips are being reported to you, the 
    A                $1,800       $270/$1,885 =                   $258   IRS offers a service called the Tip Rate Determination & 
    B                1,800             320/1,885 =                 306
    D                1,800             475/1,885 =                 454   Education Program. This program can assist you, the 
    E                1,800             450/1,885 =                 430   employer, in implementing more effective methods of tip 
    F                1,800             370/1,885 =                 353   income reporting. The program also offers assistance in 
Because employee C has no shortfall, there is no allocation to C.        educating tipped employees concerning their obligations 
                                                                         relating to the reporting of any tip income they receive. To 
                                                                         find out more about this program or to participate in a 
    In this example, the total amount of the allocation                  voluntary tip compliance agreement, see Pub. 3144. You 
TIP is $1,801 resulting from the rounding off to whole                   may also send an email to TIP.Program@irs.gov and 
    numbers.                                                             request information on this program.
                                                                           Technical Services Operation (TSO) is available to 
For additional examples for the hours-worked method 
                                                                         answer questions about reporting on Forms 8027, W-2, 
and gross receipts method, see Regulations section 
                                                                         W-3, and 1099, and other information returns. If you have 
31.6053-3(f).
                                                                         questions about reporting on information returns, call TSO 
Employer's Optional Worksheet                                            toll free at 866-455-7438 or 304-263-8700 (not toll free). 
                                                                         The IRS welcomes calls via your choice of relay. Deaf or 
for Tipped Employees                                                     hard-of-hearing taxpayers using a relay service may call 
Unreported tip income can lead to additional employer                    any of our toll-free numbers.
liability for social security tax and Medicare tax. As a                   You can also reach the center by email at 
means of determining if your employees are reporting all                 mccirp@irs.gov. Don't include taxpayer identification 
of their tips to you, please take a few minutes to voluntarily           numbers (TINs) or attachments in email correspondence 
complete the following worksheet. Completing this                        because it isn't secure.
worksheet is only for the employer's information (don't 
send it to the IRS).                                                     Privacy Act and Paperwork Reduction Act Notice.                   We 
                                                                         ask for the information on Form 8027 to carry out the 
                                                                         Internal Revenue laws of the United States. You're 
                                                                         required to give us the information. We need it to ensure 

Instructions for Form 8027 (2024)                                                                                                          9

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that you're complying with these laws and to allow us to section 6103 allows or requires the IRS to disclose or give
figure and collect the right amount of tax. the information shown on your tax return to others as
Chapter 61, Information and Returns, of Subtitle F, described in the Code. For example, we may disclose your
Procedure and Administration, requires certain employers tax information to the Department of Justice for civil and
to report gross receipts, tips reported to them, and any criminal litigation, and to cities, states, the District of
allocated tips; and to furnish the amount of any allocated Columbia, and U.S. commonwealths and territories to
tips to affected employees. Section 6053 and its related administer their tax laws. We may also disclose this
regulations provide the definitions and methodology to be information to other countries under a tax treaty, to federal
used in completing these forms. If you fail to provide this and state agencies to enforce federal nontax criminal
information in a timely manner, you may be liable for laws, or to federal law enforcement and intelligence
penalties as provided by section 6721. agencies to combat terrorism.
You're not required to provide the information requested The time needed to complete and file Form 8027 will
on a form that is subject to the Paperwork Reduction Act vary depending on individual circumstances. The
unless the form displays a valid OMB control number. estimated burden for employers filing Form 8027 is
Books or records relating to a form or its instructions must approved under OMB control number 1545-0029 and is
be retained as long as their contents may become included in the estimates shown in the Instructions for
material in the administration of any Internal Revenue law. Form 941.
Generally, tax returns and return information are
confidential, as required by section 6103. However,

10 Instructions for Form 8027 (2024)

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