8846 Credit for Employer Social Security and Medicare Taxes P

2007 Form 8846, Credit for Employer Social Security
and Medicare Taxes Paid on Certain Employee Tips
Purpose: This is the third circulated draft of the 2007 form 8846 for your review and
comments. The major changes listed below are only the changes made since the second
circulated draft.
TPCC Meeting: None, but one may be arranged if requested.
First Circulation: The first circulated draft of the 2007 Form 8846 is available at:
http://taxforms.web.irs.gov/Products/Drafts/2007-2/07f8846_d1.pdf
Second Circulation: The second circulated draft of the 2007 Form 8846 is
available at: http://taxforms.web.irs.gov/Products/Drafts/2007-2/07f8846_d2.pdf.
Prior Version: The 2006 Form 8846 is available at:
http://www.irs.gov/pub/irs-pdf/f8846.pdf.
Other Products: Circulations of draft tax forms, instructions, notices, and publications
are posted at: http://taxforms.web.irs.gov/draft_products.html.
Comments: Please email, fax, call, or mail any comments by September 12, 2007, to
me at the address below and email the form’s reviewer, Sharon Dewsbury, at
[email protected].
Kelli Patilla
Tax Forms and Publications
SE:W:CAR:MP:T:B
Phone: 202-283-2734
Email: [email protected]
Major changes to the 2007 Form 8846
Instructions for Form 8846
Lines 10 and 22, we added filing instructions based on P.L. 110-28, sec. 8214.

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Form

I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8846, PAGE 1 OF 4
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES. PRINTS: HEAD TO HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 216mm (81⁄ 2 ") 3 279mm (11")
PERFORATE: NONE
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

8846

Action

Date

O.K. to print
Revised proofs
requested

Credit for Employer Social Security and Medicare Taxes
Paid on Certain Employee Tips

Department of the Treasury
Internal Revenue Service

Name(s) shown on return

Signature

OMB No. 1545-1414

2007

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©

Attachment
Sequence No.

Attach to your tax return.

98

Identifying number

Note. Claim this credit only for social security and Medicare taxes paid by a food or beverage establishment where tipping is
customary for providing food or beverages. See the instructions for line 1.

Part I
1

Current Year Credit

Tips received by employees for services on which you paid or incurred employer social security
and Medicare taxes during the tax year (see instructions)

1

2

Tips not subject to the credit provisions (see instructions)

2

3
4

Creditable tips. Subtract line 2 from line 1
Multiply line 3 by 7.65% (.0765). If you had any tipped employees whose wages (including tips)
©
exceeded $97,500, see instructions and check here
Credit for employer social security and Medicare taxes paid on certain employee tips from
partnerships and S corporations
Add lines 4 and 5. Partnerships and S corporations, report this amount on Schedule K; all
others, go to line 7

3

5
6
7

Credit for employer social security and Medicare taxes paid on certain employee tips included
on line 6 from passive activities (see instructions)
8 Subtract line 7 from line 6
9 Credit for employer social security and Medicare taxes paid on certain employee tips allowed
for 2007 from passive activities (see instructions)
10 Carryback of the credit for employer social security and Medicare taxes paid on certain employee
tips from 2008 (see instructions)
11 Add lines 8 through 10. Use this amount to complete Part II
Part II Allowable Credit
12
13
14
15a

Regular tax before credits (see instructions)
Alternative minimum tax (see instructions)
Add lines 12 and 13
Credits from Form 1040, lines 47 through 50 and 52 through 54 (or
Form 1040NR, lines 44, 45, and 47 through 49)

b
c
d
e

Foreign tax credit
Credits from Forms 5735 and 8834
Non-business alternative motor vehicle credit (Form 8910, line 18)
Non-business alternative fuel vehicle refueling property credit (Form
8911, line 19)

5

6

7
8

9
10
11
12
13
14

15a
15b
15c
15d
15e

f Add lines 15a through 15e
16 Net income tax. Subtract line 15f from line 14. If zero, skip lines 17 through 20 and enter -0on line 21
Net regular tax. Subtract line 15f from line 12. If zero or less, enter -0Enter 25% (.25) of the excess, if any, of line 17 over $25,000 (see instructions)
Subtract line 18 from line 16. If zero or less, enter -020a
General business credit (Form 3800, line 19)
Empowerment zone and renewal community employment credit
20b
(Form 8844, line 26)
20c
c Work opportunity credit (Form 5884, line 22)
20d
d Alcohol fuels credit (Form 6478, line 24)
e Renewable electricity, refined coal, and Indian coal production
20e
credit (Form 8835, line 43)

17
18
19
20a
b

f Add lines 20a through 20e
21 Subtract line 20f from line 19. If zero or less, enter -022 Credit allowed for the current year. Enter the smaller of line 11 or 21. Report this amount
on Form 1040, line 55; Form 1040NR, line 50; Form 1120, Schedule J, line 5c; or the
applicable line of your return. If line 21 is smaller than line 11, see instructions
For Paperwork Reduction Act Notice, see back of form.

4

Cat. No. 16148Z

15f
16
17
18
19

20f
21

22
Form

8846

(2007)

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I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8846, PAGE 2 OF 4
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES. PRINTS: HEAD TO HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 216mm (81⁄ 2 ") 3 279mm (11")
PERFORATE: NONE
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 8846 (2007)

General Instructions
Section references are to the
Internal Revenue Code.

What’s New
For tax years beginning in 2007,
there is no longer an alternative
minimum tax limitation with respect
to this credit. Taxpayers must
complete Part II of the form to
compute the allowable credit.

Purpose of Form
Certain food and beverage
establishments (see Who Should File
below) use Form 8846 to claim a
credit for social security and
Medicare taxes paid or incurred by
the employer on certain employees’
tips. The credit is part of the general
business credit.
You can claim or elect not to claim
the credit any time within 3 years
from the due date of your return on
either your original return or on an
amended return.

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$515. For credit purposes, the $450 in
tips is reduced by $140 (the difference
between $515 and $375), and only
$310 of the employee’s tips for
October 2007 is taken into account.

Specific Instructions

Part I. Current Year Credit

Figure the current year credit from
your trade or business on lines 1
through 4.

Line 1
Enter the tips received by employees
for services on which you paid or
incurred employer social security and
Medicare taxes during the tax year.
Include tips received from
customers for providing, delivering,
or serving food or beverages for
consumption if tipping of employees
for delivering or serving food or
beverages is customary.

File Form 8846 if you meet both of
the following conditions.
1. You had employees who
received tips from customers for
providing, delivering, or serving food
or beverages for consumption if
tipping of employees for delivering or
serving food or beverages is
customary.
2. During the tax year, you paid or
incurred employer social security and
Medicare taxes on those tips.

Line 2
If you pay each tipped employee
wages (excluding tips) equal to or
more than $5.15 an hour enter zero
on line 2.
Figure the amount of tips included
on line 1 that are not creditable for
each employee on a monthly basis.
This is the total amount that would
be payable to the employee at $5.15
an hour reduced by the wages
(excluding tips) actually paid to the
employee during the month. Enter on
line 2 the total amounts figured for all
employees.

How the Credit Is Figured

Line 4

Generally, the credit equals the
amount of employer social security
and Medicare taxes paid or incurred
by the employer on tips received by
the employee. However, the amount
of tips for any month that are used to
figure the credit must be reduced by
the amount by which the wages that
would have been payable during that
month at $5.15 an hour exceed the
wages (excluding tips) paid by the
employer during that month.

If any tipped employee’s wages and
tips exceeded the 2007 social security
tax wage base of $97,500 subject to
the 6.2% rate, check the box on line 4
and attach a separate computation
showing the amount of tips subject to
only the Medicare tax rate of 1.45%.
Subtract these tips from the line 3 tips,
and multiply the difference by .0765.
Then, multiply the tips subject only to
the Medicare tax by .0145. Enter the
sum of these amounts on line 4.
Reduce the income tax deduction for
employer social security and Medicare
taxes by the amount on line 4.

Who Should File

For example, an employee worked
100 hours and received $450 in tips
for October 2007. The worker
received $375 in wages (excluding
tips) at the rate of $3.75 an hour. If
the employee had been paid $5.15
an hour, the employee would have
received wages, excluding tips, of

2

Line 7
Enter the amount included on line 6
that is from a passive activity.
Generally, a passive activity is a trade

or business in which you did not
materially participate. Rental activities
are generally considered passive
activities, whether or not you materially
participate. For details, see Form
8582-CR, Passive Activity Credit
Limitations (for individuals, trusts, and
estates), or Form 8810, Corporate
Passive Activity Loss and Credit
Limitations (for corporations).
Line 9
Enter the passive activity credit
allowed for the 2007 credit for
employer social security and
Medicare taxes paid on certain
employee tips from Form 8582-CR or
Form 8810.
Line 10
Use line 10 to show any carryback if
you amend your 2007 return to carry
back an unused credit from 2008.

Part II. Allowable Credit
The credit allowed for the current
year may be limited based on your
tax liability. Use Part II to figure the
allowable credit.
Line 12
Enter the regular tax before credits
from the following line of the
appropriate form or schedule.
● Individuals: Form 1040, line 44;
Form 1040NR, line 41.
● Corporations: Form 1120,
Schedule J, line 2; or the applicable
line of your return.
● Estates and trusts: The sum of the
amounts from Form 1041, Schedule
G, lines 1a and 1b; or the amount
from the applicable line of your
return.
Line 13
Enter the alternative minimum tax
(AMT) from the following line of the
appropriate form or schedule.
● Individuals: Form 6251, line 35.
● Corporations: Form 4626, line 14.
● Estates and trusts: Form 1041,
Schedule I, line 56.
Line 18
See section 38(c)(5) for special rules
that apply to married couples filing
separate returns, controlled corporate
groups, regulated investment
companies, real estate investment
trusts, and estates and trusts.

Note. Report any carryforward from 2006 of the credit for
employer social security and Medicare taxes paid on certain
employee tips on the Form 3800 carryforward line.

7
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8846, PAGE 3 OF 4, (PAGE 4 IS BLANK)
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES. PRINTS: HEAD TO HEAD
PAPER: WHITE, WRITING, SUB. 20
INK: BLACK
FLAT SIZE: 216mm (81⁄ 2 ") 3 279mm (11")
PERFORATE: NONE
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Form 8846 (2007)

When carrying back the credit from 2007 to 2006,
use the 2006 Form 6478, Credit for Alcohol Used as Fuel, line
10, and enter “T” to the left of the entry space.

Line 22
If you cannot use all of the credit
because of the tax liability limit, carry
the unused credit back 1 year then
forward up to 20 years.
Paperwork Reduction Act Notice.
We ask for the information on this
form to carry out the Internal
Revenue laws of the United States.
You are required to give us the
information. We need it to ensure
that you are complying with these
laws and to allow us to figure and
collect the right amount of tax.
You are not required to provide the
information requested on a form that

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is subject to the Paperwork
Reduction Act 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
material in the administration of any
Internal Revenue law. Generally, tax
returns and return information are
confidential, as required by section
6103.

The time needed to complete and
file this form will vary depending on
individual circumstances. The
estimated burden for individual
taxpayers filing this form is approved
under OMB control number

Printed on recycled paper

3

1545-0074 and is included in the
estimates shown in the instructions
for their individual income tax return.
The estimated burden for all other
taxpayers who file this form is shown
below.

Recordkeeping
2 hr., 9 min.
Learning about
18 min.
the law or the form
Preparing and sending
the form to the IRS
20 min.
If you have comments concerning
the accuracy of these time estimates
or suggestions for making this form
simpler, we would be happy to hear
from you. See the instructions for the
tax return with which this form is filed.