2023

Instructions for Form 8027

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

Department of the Treasury

Internal Revenue Service

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). 

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 

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

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Aug 24, 2023 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.

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.

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.

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.

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 

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

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 ......

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 ..........

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.

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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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 meet the 10-employee test, file a separate 

Form 8027 for each food or beverage operation 

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.

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.

If you're required to report for more than one 

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.

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.

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.

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).

CAUTION

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Where To File

If you file a paper return, mail Form 8027 to:

Department of the Treasury

Internal Revenue Service

Ogden, UT 84201

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.

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.

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.

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.

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.

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 

Instructions for Form 8027 (2023) -3-
employer for providing the food and beverages plus a 

reasonable profit factor.

Remind all directly and indirectly tipped 

employees to include all charged tips and all cash 

tips received in the tip amount that they must 

report to you.

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.

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.

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

TIP

Don't mail Form 8027 to this address. See Where 

To File, earlier.

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.

“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.”

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 

CAUTION

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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 

paper Form 8027. See Pub. 1239 for instructions 

on submitting a copy of your “lower rate” determination 

letter from the IRS when filing electronically.

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.

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.

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 

CAUTION

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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.

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.

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.

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.

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.

CAUTION

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Instructions for Form 8027 (2023) -5-
Always be sure the EIN on the form you file exactly 

matches the EIN that the IRS assigned to your 

business. Don't use your social security number 

on forms that ask for an EIN.

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.

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.

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.

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.

Does This Establishment Accept 

Credit Cards, Debit Cards, or Other 

Charges?

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.

Lines 1 Through 8

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.

TIP

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.

Line 1. Total Charged Tips for Calendar Year 

2023

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.

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.

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.

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

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.

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.

Line 4a

+ Line 4b

Line 4c

-6- Instructions for Form 8027 (2023)
In figuring the tips you should report for 2023, 

don't include tips received by employees in 

December 2022 but not reported until January 

2023. However, include tips received by employees in 

December 2023 but not reported until January 2024.

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 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.

The 8% rate (or lower rate) is used for tip 

allocation purposes only. Using this rate doesn't 

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.

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.

If you have allocated tips using other than the 

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

amount of allocated tips (if any) from your records 

on line 7.

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 

CAUTION

!

CAUTION

!

TIP

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.

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.

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.

Line 7b. Gross Receipts Method

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 

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.

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, 

TIP

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.

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.

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.

• 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.

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.

-8- Instructions for Form 8027 (2023)
Directly 

tipped 

employees

Gross receipts 

for payroll 

period Tips reported

A $18,000 $1,080

B 16,000 880

C 23,000 1,810

D 17,000 800

E 12,000 450

F 14,000 680

Totals $100,000 $5,700 

1. $100,000 (gross receipts) x 0.08 = $8,000

2. $8,000 − $500 (tips reported by indirectly tipped employees) = 

$7,500

3.

Directly 

tipped 

employees

Directly tipped 

employees' 

share of 8% of 

the gross

(Times) 

Gross receipts 

ratio

Employee's 

share of 8% 

of gross

A $7,500 18,000/100,000 = $1,350

B $7,500 16,000/100,000 = 1,200

C $7,500 23,000/100,000 = 1,725

D $7,500 17,000/100,000 = 1,275

E $7,500 12,000/100,000 = 900

F $7,500 14,000/100,000 = 1,050

Total $7,500

4. Directly 

tipped 

employees

Employee's 

share of 8% of 

the gross

(Minus) 

Tips reported

Employee 

shortfall

A $1,350 $1,080 = $270

B $1,200 880 = 320

C $1,725 1,810 = – 

D $1,275 800 = 475

E $ 900 450 = 450

F $1,050 680 = 370

Total shortfall $1,885

5. $8,000 less $6,200 (total tips reported) = $1,800 (amount allocable 

among employees who had a shortfall)

6. Shortfall 

employees

Allocable 

amount

(Times) 

Shortfall ratio

Amount of 

allocation

A $1,800 $270/1,885 = $258

B $1,800 320/1,885 = 306

D $1,800 475/1,885 = 454

E $1,800 450/1,885 = 430

F $1,800 370/1,885 = 353

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

In this example, the total amount of the allocation 

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).

TIP

1. Enter amount from Form 8027, line 1 ...... 1.

2. Enter amount from Form 8027, line 2 ...... 2.

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.

5. Enter amount from Form 8027, line 5 ...... 5.

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 

here ...........................

7.

8. Potential unreported tips. Multiply line 7 by 

line 5 ..........................

8.

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.

Another quick method to determine if your 

employees are properly reporting all of their tips to 

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.

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 TIP.Program@irs.gov 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 

mccirp@irs.gov. Don't include tax identification numbers 

(TINs) or attachments in email correspondence because it 

isn't secure.

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 

TIP

Instructions for Form 8027 (2023) -9-
complying with these laws and to allow us to figure and 

collect the right amount of tax.

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.

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 

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.

The time needed to complete and file these forms will 

vary depending on individual circumstances. The 

estimated average times are:

Forms 8027 8027-T

Recordkeeping................ 7 hr., 53 min. 43 min.

Learning about the law or the form ... 53 min.

Preparing and sending the form to the 

IRS ....................... 1 hr., 3 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.

-10- Instructions for Form 8027 (2023)