Form 8846

Department of the Treasury 

Internal Revenue Service

Credit for Employer Social Security and Medicare Taxes 

Paid on Certain Employee Tips

▶ Attach to your tax return.

▶ Information about Form 8846 and its instructions is at www.irs.gov/form8846.

OMB No. 1545-0123

2016

Attachment 

Sequence No. 98

Name(s) shown on return Identifying number

Note: Claim this credit only for employer social security and Medicare taxes paid by a food or beverage establishment 

where tipping is customary for providing food or beverages. See the instructions for line 1.

1 Tips received by employees for services on which you paid or incurred employer social 

security and Medicare taxes during the tax year (see instructions) . . . . . . . . 1 

2 Tips not subject to the credit provisions (see instructions) . . . . . . . . . . . 2 

3 Creditable tips. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . 3 

4 Multiply line 3 by 7.65% (0.0765). If you had any tipped employees whose wages 

(including tips) exceeded $118,500, see instructions and check here . . . . . ▶ 4 

5 Credit for employer social security and Medicare taxes paid on certain employee tips 

from partnerships and S corporations . . . . . . . . . . . . . . . . . . 5 

6 Add lines 4 and 5. Partnerships and S corporations, report this amount on Schedule K. 

All others, report this amount on Form 3800, Part III, line 4f . . . . . . . . . . 6 

For Paperwork Reduction Act Notice, see instructions. Cat. No. 16148Z Form 8846 (2016)
Form 8846 (2016) Page 2

General Instructions

Section references are to the Internal 

Revenue Code unless otherwise 

noted.

Future Developments

For the latest information about 

developments related to Form 8846 

and its instructions, such as legislation 

enacted after they were published, go 

to www.irs.gov/form8846.

Purpose of Form

Certain food and beverage 

establishments (see Who Should File

below) use Form 8846 to claim a credit 

for social security and Medicare taxes 

paid or incurred by the employer on 

certain employees’ tips. The credit is 

part of the general business credit.

You can claim or elect not to claim 

the credit any time within 3 years 

from the due date of your return on 

either your original return or on an 

amended return.

Partnerships and S corporations 

must file this form to claim the 

credit. All other taxpayers are not 

required to complete or file this form 

if their only source for this credit is a 

partnership or S corporation. 

Instead, they can report this credit 

directly on line 4f in Part III of Form 

3800, General Business Credit.

For information regarding taxes 

imposed on tips, including 

information on the difference 

between tips and service charges, 

see Rev. Rul. 2012-18, 2012-26 

I.R.B. at www.irs.gov/irb/2012-26.

Who Should File

File Form 8846 if you meet both of 

the following conditions.

1. You had employees who received 

tips from customers for providing, 

delivering, or serving food or 

beverages for consumption if tipping 

of employees for delivering or serving 

food or beverages is customary.

2. During the tax year, you paid or

incurred employer social security 

and Medicare taxes on those tips.

How the Credit Is Figured

Generally, the credit equals the 

amount of employer social security 

and Medicare taxes paid or incurred 

by the employer on tips received by 

the employee. However, employers 

cannot claim the credit for taxes on 

any tips that are used to meet the 

federal minimum wage rate in effect 

on January 1, 2007, $5.15 an hour. 

Therefore, the amount of tips for any 

month that are used to figure the 

credit must be reduced by the 

amount by which the wages that 

would have been payable during that 

month at $5.15 an hour exceed the 

wages (excluding tips) paid by the 

employer during that month. 

For example, an employee worked 

100 hours and received $450 in tips 

for October 2016. The worker received 

$375 in wages (excluding tips) at the 

rate of $3.75 an hour. If the employee 

had been paid $5.15 an hour, the 

employee would have received wages, 

excluding tips, of $515. For credit 

purposes, the $450 in tips is reduced 

by $140 (the difference between $515 

and $375), and only $310 of the 

employee’s tips for October 2016 is 

taken into account.

A 0.9% Additional Medicare Tax 

applies to Medicare wages and tips. 

However, Additional Medicare Tax is 

only imposed on the employee. 

There is no employer share of 

Additional Medicare Tax. Thus, there 

is no effect on the credit for 

employer social security and 

Medicare taxes on certain employee 

tips.

Specific Instructions

Figure the current year credit from 

your trade or business on lines 1 

through 4.

Line 1

Enter the tips received by employees 

for services on which you paid or 

incurred employer social security and 

Medicare taxes during the tax year.

Include tips received from customers 

for providing, delivering, or serving food 

or beverages for consumption if tipping 

of employees for delivering or serving 

food or beverages is customary.

Line 2

If you pay each tipped employee wages 

(excluding tips) equal to or more than 

$5.15 an hour, enter zero on line 2.

Figure the amount of tips included 

on line 1 that are not creditable for 

each employee on a monthly basis. 

This is the total amount that would be 

payable to the employee at $5.15 an 

hour reduced by the wages (excluding 

tips) actually paid to the employee 

during the month. Enter on line 2 the 

total amounts figured for all employees.

Line 4

If any tipped employee’s wages and 

tips exceeded the 2016 social 

security tax wage base of $118,500 

subject to the 6.2% rate, check the 

box on line 4 and attach a separate 

computation showing the amount of 

tips subject to only the Medicare tax 

rate of 1.45%. Subtract these tips 

from the line 3 tips, and multiply the 

difference by 0.0765. Then, multiply 

the tips subject only to the Medicare 

tax by 0.0145. Enter the sum of 

these amounts on line 4. 

Reduce the income tax deduction 

for employer social security and 

Medicare taxes by the amount on 

line 4.

Paperwork Reduction Act Notice. 

We ask for the information on this

form to carry out the Internal

Revenue laws of the United States.

You are required to give us the

information. We need it to ensure

that you are complying with these

laws and to allow us to figure and

collect the right amount of tax.

You are not required to provide the 

information requested on a form that is 

subject to the Paperwork Reduction 

Act unless the form displays a valid 

OMB control number. Books or 

records relating to a form or its 

instructions must be retained as long 

as their contents may become material 

in the administration of any Internal 

Revenue law. Generally, tax returns 

and return information are confidential, 

as required by section 6103.

The time needed to complete and 

file this form will vary depending on 

individual circumstances. The 

estimated burden for individual and 

business taxpayers filing this form is 

approved under OMB control 

number 1545-0074 and 1545-0123 

and is included in the estimates 

shown in the instructions for their 

individual and business income tax 

return. 

If you have comments concerning 

the accuracy of these time estimates 

or suggestions for making this form 

simpler, we would be happy to hear 

from you. See the instructions for the 

tax return with which this form is 

filed.