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Department of the Treasury
Internal Revenue Service
2023

Instructions for Form 8027

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

Section references are to the Internal Revenue Code PEOs handle various payroll administration and tax
unless otherwise noted. reporting responsibilities for their business clients and are
typically paid a fee based on payroll costs. To become and
Future Developments remain certified under the certification program, CPEOs
must meet various requirements described in sections
For the latest information about developments related to 3511 and 7705 and related published guidance. A CPEO
Form 8027 and its instructions, such as legislation is generally treated for employment tax purposes as the
enacted after they were published, go to IRS.gov/ employer of any individual who performs services for a
Form8027. customer of the CPEO and is covered by a contract
described in section 7705(e)(2) between the CPEO and
What’s New the customer (CPEO contract), but only for wages and
other compensation paid to the individual by the CPEO.
Electronic filing. If you're required to file 10 or more For purposes of Form 8027, the customer for whom a
information returns during the year, you must file the forms work site employee performs services (that is, the
electronically. Information returns are filed electronically employer who operates a large food or beverage
through the Filing Information Returns Electronically establishment) is considered the employer and must file
(FIRE) system. Go to IRS.gov/FIRE for more information. Form 8027. The CPEO must furnish to the customer any
See Pub. 1239 for more information about filing Form information necessary to complete this form.
8027 electronically. We encourage you to file electronically
even if you're not required to file 10 or more information For more information about CPEOs, go to IRS.gov/
returns. CPEO. Also see Rev. Proc. 2023-18, 2023-13 I.R.B. 605,
available at IRS.gov/irb/2023-13_IRB#REV-
PROC-2023-18.
Reminders

• You must check either the “Yes” or “No” box under the General Instructions
employer's name and address to indicate whether or not
the establishment accepts credit cards, debit cards, or Purpose of Form
other charges. If the “Yes” box is checked, lines 1 and 2 of Employers must annually report to the IRS receipts and
Form 8027 must be completed, and you must enter an tips from their large food or beverage establishments.
amount, even if zero, on lines 1 and 2. Also see the Employers use Form 8027 to report that information. In
instructions for lines and .1 2 addition, employers use Form 8027 to determine allocated
• You can complete the optional Worksheet for tips for tipped employees.
Determining if You Must File Form 8027 for Calendar Year
2023, later, to determine if you must file Form 8027. These instructions give you some background
• You may want to use the Employer's Optional information about Form 8027. They tell you who must file
Worksheet for Tipped Employees, later, as a means of Form 8027, when and where to file it, and how to fill it out
determining if your employees are reporting all of their tip line by line.
income to you. All employees receiving $20 or more a month in
• For information about the credit for employer social TIP cash tips must report 100% of their tips to you in a
security and Medicare taxes paid on certain employee written report. Cash tips include tips paid by cash,
tips, see Form 8846. Also see section 6 of Pub. 15 for check, debit card, and credit card. The report should
more information about tips. include tips you paid over to the employee for charge
• You can advise your employees to see Pub. 531 or use customers, tips the employee received directly from
the IRS Interactive Tax Assistant at IRS.gov/TipIncome for customers, and tips received from other employees under
help in determining if their tip income is taxable and for any tip-sharing arrangement.
information about how to report tip income.
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

Aug 24, 2023 Cat. No. 61013P

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• Whose employer normally employed more than 10 d'), wine stewards, cooks, and kitchen help. Examples of
employees on a typical business day during the preceding employees who aren't food or beverage employees
calendar year. We call this the 10-employee test. To include, but aren't limited to, coat check persons,
determine if you meet the 10-employee test, see bellhops, and doormen.
Worksheet for Determining if You Must File Form 8027 for
Calendar Year 2023, later. Worksheet for Determining if You Must File Form
8027 for Calendar Year 2023
Food or beverage operation. A food or beverage
operation is any business activity that provides food or You can complete the optional worksheet to determine if
beverages for consumption on the premises, other than you had more than 10 employees on a typical business
fast food operations. An operation is a fast food operation day during 2022 and, therefore, must file Form 8027 for
only if its customers order, pick up, and pay for food or 2023. It is the average number of employee hours
beverages at a counter or window and then carry the food worked on a typical business day that determines
or beverages to another location (either on or off the whether or not you employed more than 10 employees.
premises). Some people call food or beverage operations Completing this worksheet is only for the employer's
venues, stores, rooms, outlets, or cost centers. information (don't send it to the IRS).
If you provide food or beverages at more than one You must consider the following when completing the
location, the activity at each separate location is worksheet.
considered to be a separate food or beverage operation • Include employees at all of your food or beverage
and a separate Form 8027 is filed for each location. You operations, even if an individual operation has fewer than
could also have more than one food or beverage operation 10 employees.
within a single building. Each activity conducted within a • Include all employees at your food or beverage
single building is treated as a separate location if the operations, not just food or beverage employees.
customers of the activity, while being provided with food or • Don't include employees at fast food operations.
beverages, occupy an area separate from that occupied • Don't apply the 10-employee test separately to each
by customers of other activities and the gross receipts food or beverage operation.
from the activity are recorded separately. For example, a • Don't consider anyone who owns 50% or more in value
gourmet restaurant, a coffee shop, and a cocktail lounge of the stock of a corporation as an employee for the
in a hotel would each be treated as a separate food or 10-employee test. See Regulations section 31.6053-3(j)
beverage operation if gross receipts from each activity are (9) for more information.
recorded separately. In addition, an employer may treat
different activities conducted in the identical place at 1. Enter one-half of the total employee hours worked
different times as separate food or beverage operations if during the month in 2022 with the greatest
the gross receipts of the activities at each time are aggregate gross receipts from food and
recorded separately. For example, a restaurant may beverages . . . . . . . . . . . . . . . . . . . . . . . .
record the gross receipts from its cafeteria-style lunch 2. Enter the number of days opened for business
operation separately from the gross receipts of its during the month used for line 1 . . . . . . . . . . .
full-service food or beverage operations. 3. Enter one-half of the total employee hours worked
Tipping of food or beverage employees by custom- during the month in 2022 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% 4. Enter the number of days opened for business
of total sales (other than carryout) had a service charge of during the month used for line 3 . . . . . . . . . . .
10% or more. See Regulations section 31.6053-3(j)(7) 5. Divide line 1 by line 2 . . . . . . . . . . . . . . . . .
and (18) for more information. If tipping isn't considered 6. Divide line 3 by line 4 . . . . . . . . . . . . . . . . .
customary, the food or beverage operation isn't a large
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 2023 . . . . . . . . . .
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 tray to a table. The 80 hours, then you meet the 10-employee test.
restaurant employees clear the tables but may also help Example. Oak Co. operates five restaurants in the
the customers if they need anything extra. Customers Midwest. Those working at the restaurants include food or
rarely leave a tip. Thus, tipping isn't customary at Good beverage employees, coat check employees, and parking
Food Restaurant. Therefore, Good Food Restaurant isn't a valet employees. Oak Co. must count all the employees
large food or beverage establishment and a Form 8027 working at all five of Oak Co.'s restaurants, and not just
isn't required. the food or beverage employees, to determine the
10-employee test. Oak Co. must not figure the
Food or beverage employee. A food or beverage
10-employee test separately for each operation.
employee is an employee who provides services in
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
beverage operations for the 10-employee test, including

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the managers of the operations as well as the food or Where To File
beverage employees. Rose Casino must not figure the
10-employee test separately for each operation. If you file a paper return, mail Form 8027 to:

If you meet the 10-employee test, file a separate Department of the Treasury
Internal Revenue Service
! Form 8027 for each food or beverage operation
CAUTION where tipping is customary. This is true even if an Ogden, UT 84201
individual operation, when considered separately, doesn't
have more than 10 employees on a typical business day. Form 8027 attachments if filing on paper. If
applicable, attach a copy of your timely filed Form 8809,
Example. Continuing with the previous example, Rose
and a copy of your “lower rate” determination letter from
Casino meets the 10-employee test. All four of the food or
the IRS. If you filed Form 8508, Request for Waiver From
beverage operations meet the other tests, as they are
Filing Information Returns Electronically, attach a copy of
located in the 50 states and tipping of food or beverage
the approved waiver that you received. Don't attach any
employees by customers is customary at each of the
other documents.
operations. Each of the four food or beverage activities
record gross receipts separately and customers of each Reporting and filing electronically. You may be
activity occupy an area separate from that occupied by required to file Forms 8027 electronically. For more
customers of the other activities. Because each activity information, see Electronic filing, earlier.
qualifies as a large food or beverage establishment, Rose
Casino is required to file four Forms 8027 (a separate Penalties
Form 8027 for the restaurant, the café, the bar, and the The law provides for a penalty if you don't file Form 8027
showroom) even if an individual activity has less than 10 (and Form 8027-T, if applicable) on time unless you can
employees. show reasonable cause for the delay. In addition, if you
If you're required to report for more than one don't complete an accurate Form 8027, you won't be able
TIP establishment and you file Forms 8027 on paper, to correctly prepare Form W-2, Wage and Tax Statement,
you must complete and file Form 8027-T, for each directly tipped employee for whom a tip allocation
Transmittal of Employer's Annual Information Return of Tip was required to be made. You may be charged penalties
Income and Allocated Tips, with Forms 8027. Attach for each failure to:
Forms 8027 in establishment number order (lowest to • Timely file a correct information return (Forms 8027 and
highest). For more information on establishment numbers, W-2), including failure to file electronically, if required; and
see Establishment Number, later. Form 8027-T isn't filed • Timely furnish a correct Form W-2 to the employee.
with electronically filed Forms 8027.
For more information on penalties for untimely or
New business. You're a new business if you opened a incorrect Forms W-2 or 8027, see the penalties sections in
food or beverage operation during the year and you didn't the General Instructions for Forms W-2 and W-3, and the
operate any food or beverage operations during the General Instructions for Certain Information Returns.

preceding calendar year. File Form 8027 for a new food or Gross Receipts
beverage operation if, during any 2 consecutive calendar
months, the average number of hours worked each On Form 8027, you must report your establishment’s
business day by all employees is more than 80 hours. To gross receipts from food and beverages you provide. You
figure the average number of employee hours worked will use gross receipts to determine other amounts that
each business day during a month, divide the total hours you must report. Gross receipts include all receipts from
all employees worked during the month by the number of the provision of food or beverages (other than
days the operation was open for business. After the test is nonallocable receipts, as defined later) from cash sales,
met for 2 consecutive months, you must file a return charge receipts, charges to a hotel room (excluding tips
covering the rest of the year, beginning with the next charged to the hotel room if your accounting procedures
payroll period. allow these tips to be separated), and the retail value of
complimentary food or beverages served to customers, as
When To File explained later.

File Form 8027 (and Form 8027-T when filing more than Generally, tips aren't included in gross receipts.
one paper Form 8027) by February 29, 2024. However, if However, if you reduced your cash sales by the amount of
you file electronically, the due date for Form 8027 is March any cash you paid to tipped employees for any charged
31, 2024. tips due to them, then include those charged tips in your
Extension of time to file. Filers of Form 8027 submitted gross receipts. Don't include state or local taxes in gross
on paper or electronically may request an extension of receipts. Don't include receipts from the sale of
time to file on Form 8809. File Form 8809 as soon as you merchandise such as souvenirs, memorabilia, tee shirts,
know an extension of time to file is necessary, but not or glassware in gross receipts from food and beverages.
before January 1 of the filing year, and not later than
February 29, 2024 (March 31, 2024, if you file Forms 8027 If you don't charge separately for providing food and
electronically). beverages along with other goods or services (such as a
package deal for food and lodging), make a good-faith
estimate of the gross receipts from the food and
beverages. This estimate must reflect the cost to the

Instructions for Form 8027 (2023) -3-

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

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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. Write “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, Reporting Tip Income; and Rev. Proc. 86-21. January of the next year. Don't write “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. Write 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 write “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 writing 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

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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 2023
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 (2023)

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In figuring the tips you should report for 2023, 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 2022 but not reported until January average number of employee hours worked (both tipped
2023. However, include tips received by employees in and nontipped employees) per business day during a
December 2023 but not reported until January 2024. 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, write 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 (2023) -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 2023. 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 2023, 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.

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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, 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 tax identification numbers 
of their tips to you, please take a few minutes to voluntarily              (TINs) or attachments in email correspondence because it 
complete the following worksheet. Completing this                           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 this form to carry out the Internal 
                                                                            Revenue laws of the United States. You're required to give 
                                                                            us the information. We need it to ensure that you're 

Instructions for Form 8027 (2023)                                        -9-

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complying with these laws and to allow us to figure and administer their tax laws. We may also disclose this
collect the right amount of tax. information to other countries under a tax treaty, to federal
and state agencies to enforce federal nontax criminal
Chapter 61, Information and Returns, of Subtitle F,
laws, or to federal law enforcement and intelligence
Procedure and Administration, requires certain employers
agencies to combat terrorism.
to report gross receipts, tips reported to them, and any
allocated tips; and to furnish the amount of any allocated The time needed to complete and file these forms will
tips to affected employees. Section 6053 and its related vary depending on individual circumstances. The
regulations provide the definitions and methodology to be estimated average times are:
used in completing these forms. If you fail to provide this Forms 8027 8027-T
information in a timely manner, you may be liable for Recordkeeping. . . . . . . . . . . . . . . . 7 hr., 53 min. 43 min.
penalties as provided by section 6721.
Learning about the law or the form. . . 53 min.
You're not required to provide the information requested Preparing and sending the form to the
on a form that is subject to the Paperwork Reduction Act IRS. . . . . . . . . . . . . . . . . . . . . . . 1 hr., 3 min.
unless the form displays a valid OMB control number.
Books or records relating to a form or its instructions must
be retained as long as their contents may become If you have comments concerning the accuracy of
material in the administration of any Internal Revenue law. these time estimates or suggestions for making these
Generally, tax returns and return information are forms simpler, we would be happy to hear from you. You
confidential, as required by section 6103. However, can send us comments from IRS.gov/FormComments. Or
section 6103 allows or requires the IRS to disclose or give you can send your comments to Internal Revenue Service,
the information shown on your tax return to others as Tax Forms and Publications Division, 1111 Constitution
described in the Code. For example, we may disclose your Ave. NW, IR-6526, Washington, DC 20224. Don't send the
tax information to the Department of Justice for civil and tax forms to this address. Instead, see Where To File,
criminal litigation, and to cities, states, the District of earlier.
Columbia, and U.S. commonwealths and territories to

-10- Instructions for Form 8027 (2023)

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