Employer's Quarterly Federal Tax Return

2023

Instructions for Form 8027

Department of the Treasury
Internal Revenue Service

Employer's Annual Information Return of Tip Income and Allocated Tips
Section references are to the Internal Revenue Code
unless otherwise noted.

Future Developments
For the latest information about developments related to
Form 8027 and its instructions, such as legislation
enacted after they were published, go to IRS.gov/
Form8027.

What’s New
Electronic filing. If you're required to file 10 or more
information returns during the year, you must file the forms
electronically. Information returns are filed electronically
through the Filing Information Returns Electronically
(FIRE) system. Go to IRS.gov/FIRE for more information.
See Pub. 1239 for more information about filing Form
8027 electronically. We encourage you to file electronically
even if you're not required to file 10 or more information
returns.

Reminders
• You must check either the “Yes” or “No” box under the
employer's name and address to indicate whether or not
the establishment accepts credit cards, debit cards, or
other charges. If the “Yes” box is checked, lines 1 and 2 of
Form 8027 must be completed, and you must enter an
amount, even if zero, on lines 1 and 2. Also see the
instructions for lines 1 and 2.
• You can complete the optional Worksheet for
Determining if You Must File Form 8027 for Calendar Year
2023, later, to determine if you must file Form 8027.
• You may want to use the Employer's Optional
Worksheet for Tipped Employees, later, as a means of
determining if your employees are reporting all of their tip
income to you.
• For information about the credit for employer social
security and Medicare taxes paid on certain employee
tips, see Form 8846. Also see section 6 of Pub. 15 for
more information about tips.
• You can advise your employees to see Pub. 531 or use
the IRS Interactive Tax Assistant at IRS.gov/TipIncome for
help in determining if their tip income is taxable and for
information about how to report tip income.
Recordkeeping. You must keep records to substantiate
any information returns, employer statements to
employees, or tip allocations. The records must be kept
for 3 years after the due date of the return or statement to
which they relate.
Certified professional employer organizations
(CPEOs). The Stephen Beck, Jr., ABLE Act of 2014
required the IRS to establish a voluntary certification
program for professional employer organizations (PEOs).
Aug 24, 2023

PEOs handle various payroll administration and tax
reporting responsibilities for their business clients and are
typically paid a fee based on payroll costs. To become and
remain certified under the certification program, CPEOs
must meet various requirements described in sections
3511 and 7705 and related published guidance. A CPEO
is generally treated for employment tax purposes as the
employer of any individual who performs services for a
customer of the CPEO and is covered by a contract
described in section 7705(e)(2) between the CPEO and
the customer (CPEO contract), but only for wages and
other compensation paid to the individual by the CPEO.
For purposes of Form 8027, the customer for whom a
work site employee performs services (that is, the
employer who operates a large food or beverage
establishment) is considered the employer and must file
Form 8027. The CPEO must furnish to the customer any
information necessary to complete this form.
For more information about CPEOs, go to IRS.gov/
CPEO. Also see Rev. Proc. 2023-18, 2023-13 I.R.B. 605,
available at IRS.gov/irb/2023-13_IRB#REVPROC-2023-18.

General Instructions
Purpose of Form

Employers must annually report to the IRS receipts and
tips from their large food or beverage establishments.
Employers use Form 8027 to report that information. In
addition, employers use Form 8027 to determine allocated
tips for tipped employees.

These instructions give you some background
information about Form 8027. They tell you who must file
Form 8027, when and where to file it, and how to fill it out
line by line.
All employees receiving $20 or more a month in

TIP cash tips must report 100% of their tips to you in a

written report. Cash tips include tips paid by cash,
check, debit card, and credit card. The report should
include tips you paid over to the employee for charge
customers, tips the employee received directly from
customers, and tips received from other employees under
any tip-sharing arrangement.

Who Must File

You must file Form 8027 if you're an employer who
operates a large food or beverage establishment.

A large food or beverage establishment is a food or
beverage operation:
• That is located in the 50 states or in the District of
Columbia,
• Where tipping of food or beverage employees by
customers is customary, and

Cat. No. 61013P

• Whose employer normally employed more than 10
employees on a typical business day during the preceding
calendar year. We call this the 10-employee test. To
determine if you meet the 10-employee test, see
Worksheet for Determining if You Must File Form 8027 for
Calendar Year 2023, later.

d'), wine stewards, cooks, and kitchen help. Examples of
employees who aren't food or beverage employees
include, but aren't limited to, coat check persons,
bellhops, and doormen.

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
beverages for consumption on the premises, other than
fast food operations. An operation is a fast food operation
only if its customers order, pick up, and pay for food or
beverages at a counter or window and then carry the food
or beverages to another location (either on or off the
premises). Some people call food or beverage operations
venues, stores, rooms, outlets, or cost centers.
If you provide food or beverages at more than one
location, the activity at each separate location is
considered to be a separate food or beverage operation
and a separate Form 8027 is filed for each location. You
could also have more than one food or beverage operation
within a single building. Each activity conducted within a
single building is treated as a separate location if the
customers of the activity, while being provided with food or
beverages, occupy an area separate from that occupied
by customers of other activities and the gross receipts
from the activity are recorded separately. For example, a
gourmet restaurant, a coffee shop, and a cocktail lounge
in a hotel would each be treated as a separate food or
beverage operation if gross receipts from each activity are
recorded separately. In addition, an employer may treat
different activities conducted in the identical place at
different times as separate food or beverage operations if
the gross receipts of the activities at each time are
recorded separately. For example, a restaurant may
record the gross receipts from its cafeteria-style lunch
operation separately from the gross receipts of its
full-service food or beverage operations.

You can complete the optional worksheet to determine if
you had more than 10 employees on a typical business
day during 2022 and, therefore, must file Form 8027 for
2023. It is the average number of employee hours
worked on a typical business day that determines
whether or not you employed more than 10 employees.
Completing this worksheet is only for the employer's
information (don't send it to the IRS).

You must consider the following when completing the
worksheet.
• Include employees at all of your food or beverage
operations, even if an individual operation has fewer than
10 employees.
• Include all employees at your food or beverage
operations, not just food or beverage employees.
• Don't include employees at fast food operations.
• Don't apply the 10-employee test separately to each
food or beverage operation.
• Don't consider anyone who owns 50% or more in value
of the stock of a corporation as an employee for the
10-employee test. See Regulations section 31.6053-3(j)
(9) for more information.
1. Enter one-half of the total employee hours worked
during the month in 2022 with the greatest
aggregate gross receipts from food and
beverages . . . . . . . . . . . . . . . . . . . . . . . .
2. Enter the number of days opened for business
during the month used for line 1 . . . . . . . . . . .
3. Enter one-half of the total employee hours worked
during the month in 2022 with the least aggregate
gross receipts from food and beverages . . . . . .

Tipping of food or beverage employees by customers is customary. Generally, tipping isn't considered
customary in a cafeteria-style operation or if at least 95%
of total sales (other than carryout) had a service charge of
10% or more. See Regulations section 31.6053-3(j)(7)
and (18) for more information. If tipping isn't considered
customary, the food or beverage operation isn't a large
food or beverage establishment. Service charges aren't
tips; see Difference Between Service Charges and Tips,
later.

4. Enter the number of days opened for business
during the month used for line 3 . . . . . . . . . . .
5. Divide line 1 by line 2

. . . . . . . . . . . . . . . . .

6. Divide line 3 by line 4

. . . . . . . . . . . . . . . . .

7. Add lines 5 and 6. If line 7 is greater than 80 (hours),
you must file Form 8027 for 2023 . . . . . . . . . .

Example. Good Food Restaurant is a soup-and-salad
specialty business. Customers select food items at a
buffet. They then pay and take their tray to a table. The
restaurant employees clear the tables but may also help
the customers if they need anything extra. Customers
rarely leave a tip. Thus, tipping isn't customary at Good
Food Restaurant. Therefore, Good Food Restaurant isn't a
large food or beverage establishment and a Form 8027
isn't required.

If your answer on line 7 of the worksheet is more than
80 hours, then you meet the 10-employee test.
Example. Oak Co. operates five restaurants in the
Midwest. Those working at the restaurants include food or
beverage employees, coat check employees, and parking
valet employees. Oak Co. must count all the employees
working at all five of Oak Co.'s restaurants, and not just
the food or beverage employees, to determine the
10-employee test. Oak Co. must not figure the
10-employee test separately for each operation.

Food or beverage employee. A food or beverage
employee is an employee who provides services in
connection with the provision of food or beverages. These
employees include, but aren't limited to, waitstaff, bussers,
bartenders, persons in charge of seating (such as a maitre

Example. Rose Casino includes a fine dining
restaurant, a café, a bar, and a dinner showroom. Rose
Casino must count all employees at all these food or
beverage operations for the 10-employee test, including
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Instructions for Form 8027 (2023)

Where To File

the managers of the operations as well as the food or
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:
Department of the Treasury
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
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,
and a copy of your “lower rate” determination letter from
the IRS. If you filed Form 8508, Request for Waiver From
Filing Information Returns Electronically, attach a copy of
the approved waiver that you received. Don't attach any
other documents.

Example. Continuing with the previous example, Rose
Casino meets the 10-employee test. All four of the food or
beverage operations meet the other tests, as they are
located in the 50 states and tipping of food or beverage
employees by customers is customary at each of the
operations. Each of the four food or beverage activities
record gross receipts separately and customers of each
activity occupy an area separate from that occupied by
customers of the other activities. Because each activity
qualifies as a large food or beverage establishment, Rose
Casino is required to file four Forms 8027 (a separate
Form 8027 for the restaurant, the café, the bar, and the
showroom) even if an individual activity has less than 10
employees.

Reporting and filing electronically. You may be
required to file Forms 8027 electronically. For more
information, see Electronic filing, earlier.

Penalties

The law provides for a penalty if you don't file Form 8027
(and Form 8027-T, if applicable) on time unless you can
show reasonable cause for the delay. In addition, if you
don't complete an accurate Form 8027, you won't be able
to correctly prepare Form W-2, Wage and Tax Statement,
for each directly tipped employee for whom a tip allocation
was required to be made. You may be charged penalties
for each failure to:
• Timely file a correct information return (Forms 8027 and
W-2), including failure to file electronically, if required; and
• Timely furnish a correct Form W-2 to the employee.

If you're required to report for more than one

TIP establishment and you file Forms 8027 on paper,

you must complete and file Form 8027-T,
Transmittal of Employer's Annual Information Return of Tip
Income and Allocated Tips, with Forms 8027. Attach
Forms 8027 in establishment number order (lowest to
highest). For more information on establishment numbers,
see Establishment Number, later. Form 8027-T isn't filed
with electronically filed Forms 8027.

For more information on penalties for untimely or
incorrect Forms W-2 or 8027, see the penalties sections in
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
operate any food or beverage operations during the
preceding calendar year. File Form 8027 for a new food or
beverage operation if, during any 2 consecutive calendar
months, the average number of hours worked each
business day by all employees is more than 80 hours. To
figure the average number of employee hours worked
each business day during a month, divide the total hours
all employees worked during the month by the number of
days the operation was open for business. After the test is
met for 2 consecutive months, you must file a return
covering the rest of the year, beginning with the next
payroll period.

Gross Receipts

On Form 8027, you must report your establishment’s
gross receipts from food and beverages you provide. You
will use gross receipts to determine other amounts that
you must report. Gross receipts include all receipts from
the provision of food or beverages (other than
nonallocable receipts, as defined later) from cash sales,
charge receipts, charges to a hotel room (excluding tips
charged to the hotel room if your accounting procedures
allow these tips to be separated), and the retail value of
complimentary food or beverages served to customers, as
explained later.

When To File

File Form 8027 (and Form 8027-T when filing more than
one paper Form 8027) by February 29, 2024. However, if
you file electronically, the due date for Form 8027 is March
31, 2024.

Generally, tips aren't included in gross receipts.
However, if you reduced your cash sales by the amount of
any cash you paid to tipped employees for any charged
tips due to them, then include those charged tips in your
gross receipts. Don't include state or local taxes in gross
receipts. Don't include receipts from the sale of
merchandise such as souvenirs, memorabilia, tee shirts,
or glassware in gross receipts from food and beverages.

Extension of time to file. Filers of Form 8027 submitted
on paper or electronically may request an extension of
time to file on Form 8809. File Form 8809 as soon as you
know an extension of time to file is necessary, but not
before January 1 of the filing year, and not later than
February 29, 2024 (March 31, 2024, if you file Forms 8027
electronically).

Instructions for Form 8027 (2023)

If you don't charge separately for providing food and
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
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employer for providing the food and beverages plus a
reasonable profit factor.

!

Remind all directly and indirectly tipped
TIP employees to include all charged tips and all cash
tips received in the tip amount that they must
report to you.

Don't mail Form 8027 to this address. See Where
To File, earlier.

CAUTION

The burden of supplying sufficient information to allow
the IRS to estimate with reasonable accuracy the actual
tip rate of the establishment rests with the petitioner. Your
petition for a lower rate must clearly demonstrate that a
rate less than 8% should apply. It must include the
following information.
• Employer's name, address, and employer identification
number (EIN).
• Establishment's name, address, and establishment
number.
• Detailed description of the establishment that would
help to determine the tip rate. The description should
include the type of restaurant, days and hours of
operation, type of service including any self-service, the
person (waitstaff, cashier, etc.) to whom the customer
pays the check, whether the check is paid before or after
the meal, and whether alcohol is available.
• Past year's information shown on lines 1 through 6 of
Form 8027 as well as total carryout sales; total charge
sales; percentage of sales for breakfast, lunch, and
dinner; average dollar amount of a guest check; service
charge, if any, added to the check; and the percentage of
sales with a service charge.
• Type of clientele.
• Copy of a representative menu for each meal.
An employer petition must contain the following
statement and be signed by a responsible person who is
authorized to make and sign a return, statement, or other
document.

Nonallocable receipts. These are receipts for carryout
sales and receipts with a service charge added of 10% or
more. Carryout sales are sales of food or beverages for
consumption off the premises of the establishment. Room
service isn't a carryout sale. Nonallocable receipts
generally include all sales on which tipping isn't
customary.
Complimentary items. Food or beverages served to
customers without charge must be included in gross
receipts if (a) tipping for providing them is customary at
the establishment; and (b) they are provided in connection
with an activity that is engaged in for profit, whose receipts
wouldn't be included in the amount on line 5 of Form 8027,
and whose receipts aren't nonallocable receipts that have
a service charge of 10% or more added.
For example, you would have to include in gross
receipts the retail value of the complimentary drinks
served to customers in a gambling casino because tipping
is customary, the gambling casino is an activity engaged
in for profit, and the gambling receipts of the casino aren't
included in the amount on line 5.
However, you wouldn't have to include the retail value
of complimentary hors d'oeuvres at your bar or a
complimentary dessert served to a regular patron of your
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
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
documents, and to the best of my knowledge and
belief, the facts presented in support of this petition are
true, correct, and complete.”

Allocation of Tips

You must allocate tips among employees who receive
them if the total tips reported to you during any payroll
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
performing services for the establishment who has a
reporting shortfall for the payroll period. No allocation is
made to indirectly tipped employees.

For an employer petition, you must attach to the petition
copies of Form 8027 (if any) filed for the 3 years before
your petition. If you're petitioning for more than one
establishment or you want to know your appeal rights, see
Rev. Proc. 86-21, 1986-1 C.B. 560, for additional
information. Also, include with your petition a check or
money order made payable to “United States Treasury” for
the amount of the user fee required for determination
letters.
For the current user fee amount, consult the first
revenue procedure of the year (for example, Rev. Proc.
2023-1, 2023-01 I.R.B. 1, available at IRS.gov/irb/
2023-01_IRB#REV-PROC-2023-1). This revenue
procedure is updated annually as the first revenue
procedure of the year, but it may be modified or amplified
during the year. The user fees are posted in Appendix A of
the revenue procedure. Because the taxpayer is
requesting a determination letter, the payment for the user
fee must be submitted along with the petition for the rate
reduction.
A majority of all the directly tipped employees must
consent to any petition written by an employee. A “majority

Generally, the amount allocated is the difference
between the total tips reported by employees and 8% (or
the lower rate) of the gross receipts, other than
nonallocable receipts.
There are three methods you may use to allocate tips.
See the instructions for line 7, later, for a description of the
three methods.
Lower rate. You (or a majority of the employees) may
request a lower rate (but not lower than 2%) by submitting
a petition to:
Internal Revenue Service
National Tip Reporting Compliance
3251 North Evergreen Dr. NE
Grand Rapids, MI 49525
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Instructions for Form 8027 (2023)

the actual amount by more than 5%, prepare a new Form
W-2 with the correct information, and file Copy A with the
SSA. Write “Corrected” on the employee’s new copies (B,
C, and 2) and furnish them to the employee during
January of the next year. Don't write “Corrected” on Copy
A of the Form W-2 that you file with the SSA.

of employees” means more than half of all directly tipped
employees employed by the establishment at the time the
petition is filed. Employee groups must follow the
procedures in Regulations section 31.6053-3(h); Pub.
531, Reporting Tip Income; and Rev. Proc. 86-21.
The IRS will notify you when and for how long the
reduced rate is effective.

!

You must attach a copy of your “lower rate”
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
letter from the IRS when filing electronically.

!

CAUTION

Difference Between Service Charges
and Tips

Service charges are treated differently from tips for federal
tax purposes. Any portion of a service charge that is
distributed to an employee is wages, and you must
withhold federal income tax, social security tax, and
Medicare tax and include the amount on Form W-2 as
wages. Service charges aren't reported as tips on Form
8027. You may be required to report service charges on
line 3; see the instructions for line 3, later. To accurately
report and pay your taxes, you must correctly identify
amounts as either a tip or a service charge. Generally, an
amount is a tip if:
• The payment is made free from compulsion,
• The customer has the unrestricted right to determine
the amount (including zero),
• The payment isn't the subject of negotiation or dictated
by employer policy, and
• The customer has the right to determine who receives
the payment.
The absence of any of these factors creates a doubt as to
whether a payment is a tip and indicates that the payment
may be a service charge.

Reporting Allocated Tips to
Employees

Give each employee who has been allocated tips a Form
W-2 that shows the allocated amount in box 8. Tip
allocations have no effect on withholding income tax,
social security tax, or Medicare tax from employees’
wages. Allocated tips aren't subject to withholding and
must not be included in boxes 1, 3, 5, and 7 of Form W-2.
If you allocate tips among employees by the methods
described later under the instructions for line 7, you're not
liable to any employee if any amount is improperly
allocated. However, if the allocation shown on the
employee’s Form W-2 differs from the correct allocation by
more than 5%, you must correct that employee’s
allocation. You must also review the allocable amount of
all other employees in the same establishment to ensure
that the error didn't distort any other employee’s share by
more than 5%.
You must furnish Form W-2 to employees by January
31 of the following year. If employment ends before the
end of the year and the employee asks for the Form W-2,
a tip allocation isn't required on the early Form W-2. See If
you furnished Form W-2 before the end of the year, later.

For additional information, including examples of both
service charges and tips, see Q&A 1 in Rev. Rul. 2012-18,
2012-26 I.R.B. 1032, available at IRS.gov/irb/
2012-26_IRB#RR-2012-18.

Correcting allocated tips reported on Form W-2 furnished to an employee in January. If you furnished
Form W-2 to an employee in January and later discover
an error that requires a correction (as discussed earlier),
the method for making a correction depends on whether
Form W-2 has been filed with the Social Security
Administration (SSA).
If you filed Form W-2 with the SSA. Use the current
version of Form W-2c to report the corrected allocation
and correct the previously filed Form W-2.
If you furnished Form W-2 to an employee but
didn't file it with the SSA. Prepare a new Form W-2 with
the correct information and file Copy A with the SSA. Write
“Corrected” on the employee’s new copies (B, C, and 2),
and furnish them to the employee. Don't write “Corrected”
on Copy A of the Form W-2 that you file with the SSA.

Specific Instructions
File a separate Form 8027 for each large food or beverage
establishment. Use Form 8027-T when filing more than
one paper Form 8027.

Name and Address of Establishment
and Employer Identification Number

Type or print the name and address of the establishment.
They may be different from your mailing address, as in the
case of employers who have more than one
establishment. Enter the name by which your customers
know you (your “doing business as” name). For example,
enter the name on the front of the building or the name of
the restaurant within the casino. The EIN should be the
same as the number on the Forms W-2 that you furnish to
the employees and the Form 941 that you file to report
wages and taxes for employees working for the
establishment. However, if you use a CPEO, see Certified
professional employer organizations, earlier.

If you furnished Form W-2 before the end of the year.
You may include on the early Form W-2 the employee’s
actual tip allocation or a good-faith estimate of the
allocation. Signify a good-faith estimate by writing
“Estimate” next to the allocated amount in box 8 of the
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 (2023)

Don't send Forms W-2 to the IRS. We use the
information shown on the Forms W-2 that you file
with the SSA.

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If you have to add two or more amounts to figure the
amount to enter on a line, include cents when adding the
amounts and round off only the total.

Always be sure the EIN on the form you file exactly

TIP matches the EIN that the IRS assigned to your

business. Don't use your social security number
on forms that ask for an EIN.

Line 1. Total Charged Tips for Calendar Year
2023

If one of the following applies to you, check the
appropriate box on the left side of the form to tell us which
type of return you're filing.
• Amended return.
• Final return.

Enter the total amount of tips that are shown on charge
receipts for the year. Don't include service charges. See
Difference Between Service Charges and Tips, earlier. If
you indicated that your establishment accepts credit
cards, debit cards, or other charges but have no amounts
to report on line 1, enter zero.

Type of Establishment

Check the box (check only one box) on the form that best
describes the type of food or beverage establishment.
• An establishment that serves evening meals only (with
or without alcoholic beverages).
• An establishment that serves evening and other meals
(with or without alcoholic beverages).
• An establishment that serves only meals other than
evening meals (with or without alcoholic beverages).
• An establishment that serves food, if at all, only as an
incidental part of the business of serving alcoholic
beverages.

Line 2. Total Charge Receipts Showing Charged
Tips

Enter the total sales from the provision of food and
beverages (other than nonallocable receipts, as defined
earlier) from charge receipts that had a charged tip
shown. Include credit card charges and other credit
arrangements and charges to a hotel room unless your
normal accounting practice consistently excludes charges
to a hotel room. Don't include any tips or any state or local
taxes in the amounts reported. If you indicated that your
establishment accepts credit cards, debit cards, or other
charges but have no amounts to report on line 2, enter
zero.

Employer's Name and Address

Enter the name and address of the entity or individual
whose EIN was provided earlier. If mail isn't delivered to
your street address, enter your P.O. box number. Enter
foreign addresses as follows: city, province or state, and
country. Don't abbreviate the name of the country.

Line 3. Total Amount of Service Charges of Less
Than 10% Paid as Wages to Employees

Enter the total amount of service charges of less than 10%
that have been added to customers' bills and have been
distributed to your employees for the year.

Establishment Number

Enter a five-digit number to identify the individual
establishment that you're reporting under the same EIN.
Give each establishment a separate number and
complete a separate Form 8027 for each. For example,
each establishment could be numbered consecutively,
starting with 00001. Once you assign a number to an
establishment, always use the same number for that
establishment each year. If you close an establishment,
don't use the number you assigned to it for another
establishment.

Line 4a. Total Tips Reported by Indirectly Tipped
Employees
Enter the total amount of tips reported for the year by
indirectly tipped employees, such as cooks, bussers, and
service bartenders. Indirectly tipped employees generally
receive their tips from other tipped employees and not
directly from the customer.

Line 4b. Total Tips Reported by Directly Tipped
Employees

Does This Establishment Accept
Credit Cards, Debit Cards, or Other
Charges?

Enter the total amount of tips reported for the year by
directly tipped employees, such as bartenders and
waitstaff. Directly tipped employees receive tips directly
from customers. Treat employees, such as maitre d's, who
receive tips directly from customers and indirectly through
tip splitting or pooling, as directly tipped employees.

You must check either the “Yes” or “No” box to indicate
whether or not the establishment accepts credit cards,
debit cards, or other electronic settlement methods. If the
“Yes” box is checked, lines 1 and 2 of Form 8027 must be
completed, and you must enter on lines 1 and 2 the
appropriate amounts shown on the charge receipts. See
the instructions for lines 1 and 2, later.

Line 4c. Total Tips Reported

Add the amounts on lines 4a and 4b and enter the result
on line 4c. This amount can't be a negative amount.

Lines 1 Through 8

Line 4a
+ Line 4b
Line 4c

Rounding Off to Whole Dollars

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.
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Instructions for Form 8027 (2023)

considered to have employed fewer than the equivalent of
25 full-time employees during a payroll period if the
average number of employee hours worked (both tipped
and nontipped employees) per business day during a
payroll period is less than 200 hours.

In figuring the tips you should report for 2023,
don't include tips received by employees in
CAUTION December 2022 but not reported until January
2023. However, include tips received by employees in
December 2023 but not reported until January 2024.

!

To allocate tips by the hours-worked method, follow the
steps explained under Line 7b. Gross Receipts Method,
later. However, for the fraction in step 3 of the gross
receipts method, substitute in the numerator (top number)
the number of hours worked by each employee who is
tipped directly, and in the denominator (bottom number)
the total number of hours worked by all employees who
are directly tipped for the payroll period. See Regulations
section 31.6053-3(f)(1)(iv) for details.

Line 5. Gross Receipts From Food and
Beverages

Enter the total gross receipts from the provision of food
and beverages for the establishment for the year. See
Gross Receipts, earlier, for an explanation of what's
included in gross receipts.

Line 6

Enter the result of multiplying line 5 by 8% (0.08) or a
lower rate (if the establishment was granted a lower rate
by the IRS).

If you use the hours-worked method, be sure to enter
on line 7a the average number of employee (both tipped
and nontipped) hours worked per business day during the
payroll period. If the establishment has more than one
payroll period, you must use the payroll period in which
the greatest number of workers (both tipped and
nontipped) were employed.

If a lower rate was granted, write the rate in the space
provided and attach a copy of the IRS determination letter.
If you file Form 8027 electronically, see Pub. 1239 for
instructions on submitting a copy of the IRS determination
letter.

Line 7b. Gross Receipts Method

The 8% rate (or lower rate) is used for tip
allocation purposes only. Using this rate doesn't
CAUTION mean that directly tipped employees must report
only 8%. All directly tipped employees and indirectly
tipped employees must report the actual amount of tips
they receive.

If no good-faith agreement (as explained later) applies to
the payroll period, you must allocate the difference
between total tips reported and 8% of gross receipts using
the gross receipts method (or hours-worked method
(line 7a)) as follows (see Example for Line 7b. Gross
Receipts Method, later).

!

The instructions that follow assume you have

You may allocate tips for the calendar year, annually, by
payroll period, or by using any period that results in a
reasonable division of a calendar year, including biweekly,
semimonthly, quarterly, etc. The method you choose will
be effective for the entire calendar year.

TIP chosen to allocate tips by payroll period. However,

as described earlier in the instructions for line 6,
you may choose to allocate tips for the calendar year,
annually, or by using any period that results in a
reasonable division of a calendar year, including biweekly,
semimonthly, quarterly, etc.

If you have allocated tips using other than the

TIP calendar year, put an “X” on line 6 and enter the

amount of allocated tips (if any) from your records
on line 7.

1. Multiply the establishment's gross receipts (other
than nonallocable receipts) for the payroll period by 8%
(0.08) or the approved lower rate.
2. Subtract from the amount figured in step 1 the total
amount of tips reported by employees who were tipped
indirectly for the payroll period. This difference is the
directly tipped employees' total share of 8% (or the lower
rate) of the gross receipts of the establishment. Indirectly
tipped employees don't receive tips directly from
customers. Examples are bussers, service bartenders,
and cooks. Directly tipped employees, such as waitstaff
and bartenders, receive tips directly from customers.
Employees, such as maitre d's, who receive tips directly
from customers and indirectly through tip splitting or
pooling, are treated as directly tipped employees.
3. For each employee who is tipped directly, multiply
the result in step 2 by the following fraction: the numerator
(top number) is the amount of the establishment's gross
receipts attributable to the employee, and the
denominator (bottom number) is the gross receipts
attributable to all directly tipped employees. The result is
each directly tipped employee's share of 8% (or the lower
rate) of the gross receipts for the payroll period.
4. From each directly tipped employee's share of 8%
(or the lower rate) of the gross receipts figured in step 3,

Line 7. Allocation of Tips

If the amount shown on line 6 is more than the amount of
tips reported by your employees on line 4c, you must
allocate the excess to those employees. Enter the excess
on line 7. This excess amount is reported on each
employee's Form W-2 as described earlier under
Reporting Allocated Tips to Employees. If you previously
filed Forms W-2 for employees that didn't include accurate
tip allocations, you may be required to file Forms W-2c.
For more information, see Correcting allocated tips
reported on Form W-2 furnished to an employee in
January, earlier. If the amount on line 4c is more than the
amount on line 6, you don't need to make a tip allocation.
There are three methods by which you may allocate
tips. Check the box on line 7a, 7b, or 7c to show the
method used.

Line 7a. Hours-Worked Method

Establishments that employ fewer than the equivalent of
25 full-time employees (both tipped and nontipped
employees) during a payroll period may use the
hours-worked method to allocate tips. You will be
Instructions for Form 8027 (2023)

-7-

subtract the tips the employee reported for the payroll
period. The result is each directly tipped employee's
shortfall (if any) for the period.
5. From the amount figured in step 1, subtract the total
tips reported by both directly and indirectly tipped
employees. The result is the amount that has to be
allocated among the directly tipped employees who had a
shortfall for the payroll period as figured in step 4.
6. For each directly tipped employee who had a
shortfall for the period as figured in step 4, multiply the
amount in step 5 by the following fraction: the numerator is
the employee's shortfall (figured in step 4), and the
denominator is the total shortfall of all directly tipped
employees. The result is the amount of allocated tips for
each directly tipped employee.

• Sole proprietorship— The individual who owns the
business.
• Corporation (including a limited liability company
(LLC) treated as a corporation)— The president, vice
president, or other principal officer duly authorized to sign.
• Partnership (including an LLC treated as a partnership) or unincorporated organization— A responsible
and duly authorized member, partner, or officer having
knowledge of its affairs.
• Single-member LLC treated as a disregarded entity
for federal income tax purposes— The owner of the
LLC or principal officer duly authorized to sign.
• Trust or estate— The fiduciary.
Form 8027 may also be signed by a duly authorized
agent of the taxpayer if a valid power of attorney has been
filed.

Line 7c. Good-Faith Agreement

An allocation can be made under a good-faith agreement.
This is a written agreement between you and at least
two-thirds of the tipped employees of each occupational
category (for example, waitstaff, bussers, and maitre d's)
working in the establishment when the agreement is
adopted. The agreement must:
1. Provide for an allocation of the difference between
total tips reported and 8% (or the lower rate) of gross
receipts among tipped employees that approximates the
actual distribution of tip income among the employees;
2. Be effective the first day of a payroll period that
begins after the date the agreement is adopted, but no
later than January 1 of the next year;
3. Be adopted when there are tipped employees in
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.

Alternative signature method. Corporate officers or
duly authorized agents may sign Form 8027 by rubber
stamp, mechanical device, or computer software program.
For details and required documentation, see Rev. Proc.
2005-39, 2005-28 I.R.B. 82, available at IRS.gov/irb/
2005-28_IRB#RP-2005-39.

Example for Line 7b. Gross Receipts Method

A large food or beverage establishment has chosen to
make tip allocations using its actual payroll period. It has
gross receipts for a payroll period of $100,000 and has
tips reported for the payroll period of $6,200. Directly
tipped employees reported $5,700, while indirectly tipped
employees reported $500.

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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Instructions for Form 8027 (2023)

Directly
tipped
employees
A
B
C
D
E
F
1.
2.
3.

4.

5.
6.

Gross receipts
for payroll
period

Tips reported

$18,000
16,000
23,000
17,000
12,000
14,000

$1,080
880
1,810
800
450
680

(Times)
Gross receipts
ratio

A
B
C
D
E
F

$7,500
$7,500
$7,500
$7,500
$7,500
$7,500

18,000/100,000 =
16,000/100,000 =
23,000/100,000 =
17,000/100,000 =
12,000/100,000 =
14,000/100,000 =

$1,350
1,200
1,725
1,275
900
1,050

Total

$7,500

A
B
C
D
E
F

$1,350
$1,200
$1,725
$1,275
$ 900
$1,050

Employee's
share of 8%
of gross

Allocable
amount

A
B
D
E
F

$1,800
$1,800
$1,800
$1,800
$1,800

2.

5.

Another quick method to determine if your

you is to compare the rate of tips reported on
credit sales to the rate of tips reported on cash sales. For
example, if line 3 in the worksheet greatly exceeds the rate
determined from dividing reported cash tips by reportable
cash receipts (that is, total cash receipts less nonallocable
cash receipts), some of your employees may not be
reporting all of their tips to you and you should generally
be showing an amount on line 7 (“Allocation of tips”) of
Form 8027.

Employee
shortfall

$1,080 =
880 =
1,810 =
800 =
450 =
680 =

. . . . . .

TIP employees are properly reporting all of their tips to

$270
320
–
475
450
370

(Times)
Shortfall ratio

Amount of
allocation

$270/1,885 =
320/1,885 =
475/1,885 =
450/1,885 =
370/1,885 =

$258
306
454
430
353

Do You Need Help?

If it appears that not all tips are being reported to you, the
IRS offers a service called the Tip Rate Determination &
Education Program. This program can assist you, the
employer, in implementing more effective methods of tip
income reporting. The program also offers assistance in
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
voluntary tip compliance agreement, see Pub. 3144. You
may also send an email to [email protected] and
request information on this program.
Technical Services Operation (TSO) is available to
answer questions about reporting on Forms 8027, W-2,
W-3, 1099, and other information returns. If you have
questions about reporting on information returns, call TSO
toll free at 866-455-7438 or 304-263-8700 (not toll free).
The IRS welcomes calls via your choice of relay. Deaf or
hard of hearing taxpayers using a relay service may call
any of our toll-free numbers.
You can also reach the center by email at
[email protected]. Don't include tax identification numbers
(TINs) or attachments in email correspondence because it
isn't secure.

Because employee C has no shortfall, there is no allocation to C.

In this example, the total amount of the allocation

TIP is $1,801 resulting from the rounding off to whole
numbers.

For additional examples for the hours-worked method
and gross receipts method, see Regulations section
31.6053-3(f).

Employer's Optional Worksheet
for Tipped Employees

Unreported tip income can lead to additional employer
liability for social security tax and Medicare tax. As a
means of determining if your employees are reporting all
of their tips to you, please take a few minutes to voluntarily
complete the following worksheet. Completing this
worksheet is only for the employer's information (don't
send it to the IRS).

Instructions for Form 8027 (2023)

. . . . . .

Once you have completed the worksheet:
• If the entry on line 7 is zero or less, your employees are
probably accurately reporting their tips; however,
• If the entry on line 8 is greater than zero, depending on
the type of operation you have, it is possible that your
employees aren't reporting all of their tip income to you.

Total shortfall
$1,885
$8,000 less $6,200 (total tips reported) = $1,800 (amount allocable
among employees who had a shortfall)
Shortfall
employees

2. Enter amount from Form 8027, line 2

6. Divide line 4 by line 5, enter as a decimal (at least
4 decimal places) . . . . . . . . . . . . . . . . . .
6.
7. Subtract line 6 from line 3; if zero or less, stop
7.
here . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Potential unreported tips. Multiply line 7 by
8.
line 5 . . . . . . . . . . . . . . . . . . . . . . . . . .

Directly tipped
employees'
share of 8% of
the gross

(Minus)
Tips reported

1.

5. Enter amount from Form 8027, line 5

Directly
tipped
employees

Employee's
share of 8% of
the gross

. . . . . .

3. Divide line 1 by line 2, enter as a decimal (at least
4 decimal places) . . . . . . . . . . . . . . . . . . .
3.
4. Enter amount from Form 8027, line 4c . . . . . .
4.

Totals
$100,000
$5,700
$100,000 (gross receipts) x 0.08 = $8,000
$8,000 − $500 (tips reported by indirectly tipped employees) =
$7,500

Directly
tipped
employees

1. Enter amount from Form 8027, line 1

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
-9-

complying with these laws and to allow us to figure and
collect the right amount of tax.

administer their tax laws. We may also disclose this
information to other countries under a tax treaty, to federal
and state agencies to enforce federal nontax criminal
laws, or to federal law enforcement and intelligence
agencies to combat terrorism.

Chapter 61, Information and Returns, of Subtitle F,
Procedure and Administration, requires certain employers
to report gross receipts, tips reported to them, and any
allocated tips; and to furnish the amount of any allocated
tips to affected employees. Section 6053 and its related
regulations provide the definitions and methodology to be
used in completing these forms. If you fail to provide this
information in a timely manner, you may be liable for
penalties as provided by section 6721.

The time needed to complete and file these forms will
vary depending on individual circumstances. The
estimated average times are:
Forms
Recordkeeping .

8027
. . . . . . . . . . . . . . .

Learning about the law or the form

You're not required to provide the information requested
on a form that 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. However,
section 6103 allows or requires the IRS to disclose or give
the information shown on your tax return to others as
described in the Code. For example, we may disclose your
tax information to the Department of Justice for civil and
criminal litigation, and to cities, states, the District of
Columbia, and U.S. commonwealths and territories to

7 hr., 53 min.

. . .

53 min.

Preparing and sending the form to the
IRS . . . . . . . . . . . . . . . . . . . . . . .

1 hr., 3 min.

8027-T
43 min.

If you have comments concerning the accuracy of
these time estimates or suggestions for making these
forms simpler, we would be happy to hear from you. You
can send us comments from IRS.gov/FormComments. Or
you can send your comments to Internal Revenue Service,
Tax Forms and Publications Division, 1111 Constitution
Ave. NW, IR-6526, Washington, DC 20224. Don't send the
tax forms to this address. Instead, see Where To File,
earlier.

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Instructions for Form 8027 (2023)