OMB No. 1545-1414 Credit for Employer Social Security and Medicare Taxes

Paid on Certain Employee Tips Form 8846

© Attach to your return.

Department of the Treasury

Internal Revenue Service

Attachment

Sequence No. 98

Name(s) shown on return Identifying number

Current Year Credit

1

1

2 2

4

4

5

6

Tax Liability Limit (See Who Must File Form 3800 to find out if you complete Part II or file Form 3800.)

Form 8846 (1998)

Part I

Part II

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

and Medicare taxes during the tax year (see instructions)

3

Form 8846 credits from

flow-through entities

6 Total current year credit. Add lines 4 and 5

3

Cat. No. 16148Z

Tips not subject to the credit provisions (see instructions)

Creditable tips. Subtract line 2 from line 1

Current year credit (see instructions). Multiply line 3 by 7.65% (.0765). If you have any tipped

employee(s) whose wages (including tips) exceeded $68,400, check here ©

a

b

Shareholder

Partner

If you are a—

5

Then enter Form 8846 credit(s) from—

Schedule K-1 (Form 1065) lines 12c, 12d, or 13

Schedule K-1 (Form 1120S) lines 12d, 12e, or 13 %

Note: Claim this credit ONLY for social security and Medicare taxes paid by a food or beverage establishment where tipping is

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

● Individuals. Enter amount from Form 1040, line 40

● Corporations. Enter amount from Form 1120, Schedule J, line 3 (or Form 1120-A, Part I, line 1) 7

● Other filers. Enter regular tax before credits from your return

8a Credit for child and dependent care expenses (Form 2441, line 9) 8a

b Credit for the elderly or the disabled (Schedule R (Form 1040), line 20) 8b

8e

Foreign tax credit

e

8f f

Possessions tax credit (Form 5735, line 17 or 27)

g 8g

h 8h

Credit for fuel from a nonconventional source

i

Qualified electric vehicle credit (Form 8834, line 19)

Add lines 8a through 8k 8l

9 Net regular tax. Subtract line 8l from line 7 9

10 Alternative minimum tax:

● Individuals. Enter amount from Form 6251, line 28

● Corporations. Enter amount from Form 4626, line 15 10

● Estates and trusts. Enter amount from Form 1041, Schedule I, line 39

12 Tentative minimum tax (see instructions):

● Individuals. Enter amount from Form 6251, line 26

12

● Corporations. Enter amount from Form 4626, line 13

● Estates and trusts. Enter amount from Form 1041,

Schedule I, line 37

13 If line 9 is more than $25,000, enter 25% (.25) of the excess (see

instructions)

15 Subtract line 14 from line 11. If zero or less, enter -0- 15

16 Credit allowed for current year. Enter the smaller of line 6 or line 15 here and on Form 1040,

line 47; Form 1120, Schedule J, line 4d; Form 1120-A, Part I, line 2a; Form 1041, Schedule G,

line 2c; or the applicable line of your return 16

%

%

Mortgage interest credit (Form 8396, line 11)

d 8d

7 Regular tax before credits:

11 Net income tax. Add lines 9 and 10 11

14 Enter the greater of line 12 or line 13 14

%

13

Adoption credit (Form 8839, line 14)

c 8c

For Paperwork Reduction Act Notice, see back of form.

8i

District of Columbia first-time homebuyer credit (Form 8859, line 11)

j

1998

Education credits (Form 8863, line 18)

Child tax credit (Form 1040, line 43)

8j

k 8k

l
Form 8846 (1998) Page 2

Who Should File

How the Credit Is Figured

Who Must File Form 3800

The general business credit consists of the

following credits:

Specific Instructions

Line 2. If you pay each tipped employee

wages (excluding tips) equal to or more than

the Federal minimum wage rate, enter zero on

line 2.

S Corporations and Partnerships

Line 13. See section 38(c)(3) for special rules

that apply to married couples filing separate

returns, controlled groups, regulated

investment companies, real estate investment

trusts, and estates and trusts.

Line 16. If you cannot use all of the credit

because of the tax liability limit (line 15 is

smaller than line 6), carry the excess credit

back 1 year, and then forward for 20 years.

See the separate Instructions for Form 3800 Generally, the credit equals the amount of for details.

employer social security and Medicare taxes

paid or incurred by the employer on tips

received by the employee. However, the

employer social security and Medicare taxes

on tips that are used to meet the Federal

minimum wage rate applicable to the

employee under the Fair Labor Standards Act

are not used in the computation. The Federal

minimum wage rate is $5.15 per hour as of

September 1, 1997.

Figure the current year credit from your trade

or business on lines 1 through 4. Skip lines 1

through 4 if you are claiming only a credit

that was allocated to you from an

S corporation or a partnership.

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.

Line 4. If any tipped employee’s wages and

tips exceeded the 1998 social security tax

wage base of $68,400 subject to the 6.2%

rate, check the box on line 4 and attach a

separate computation showing the amount of

tips subject to only the Medicare tax rate of

1.45%. Subtract these tips from the line 3

tips, and multiply the difference by .0765.

Then, multiply the tips subject only to the

Medicare tax by .0145. Enter the sum of

these amounts on line 4.

Reduce the income tax deduction for

employer social security and Medicare taxes

by the amount on line 4.

For example, an employee worked 100

hours and received $350 in tips for October

1998. The worker received $375 in wages

(excluding tips) at the rate of $3.75 an hour.

Because the Federal minimum wage rate was

$5.15 an hour, the employee would have

received wages, excluding tips, of $515 had

the employee been paid at the Federal

minimum wage rate. Thus, only $210 of the

employee’s tips for October 1998 is taken

into account for credit purposes.

● Investment (Form 3468),

● Work opportunity (Form 5884),

● Alcohol used as fuel (Form 6478),

● Research (Form 6765),

● Low-income housing (Form 8586),

● Enhanced oil recovery (Form 8830),

● Renewable electricity production (Form

8835),

● Indian employment (Form 8845),

● Employer social security and Medicare

taxes paid on certain employee tips (Form

8846),

● Contributions to selected community

development corporations (Form 8847), and

The empowerment zone employment credit

(Form 8844), while a component of the

general business credit, is figured separately

on Form 8844 and is never carried to Form

3800.

● Disabled access (Form 8826),

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 the

Federal minimum wage rate 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.

S corporations and partnerships figure their

current year credit on lines 1 through 4, enter

any credit from other flow-through entities on

line 5, and allocate the credit on line 6 to the

● Trans-Alaska pipeline liability fund.

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.

The time needed to complete and file this

form will vary depending on individual

circumstances. The estimated average time

is:

Recordkeeping 7 hr., 25 min.

Learning about

the law or the form 18 min.

Preparing and sending

the form to the IRS 26 min.

If you have comments concerning the

accuracy of these time estimates or

suggestions for making this form simpler, we

would be happy to hear from you. See

instructions for the tax return with which this

form is filed.

File Form 8846 if you meet both of the

following conditions:

1. You had employees who received tips

from customers for providing, delivering, or

serving food or beverages for consumption if

tipping of employees for delivering or serving

food or beverages is customary.

2. During the tax year, you paid or incurred

employer social security and Medicare taxes

on those tips.

Line 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.

● Orphan drug (Form 8820),

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.

● Welfare-to-work (Form 8861),

Note: For services performed before 1997,

your employees also must have provided the

food or beverages for consumption on the

premises of a food or beverage establishment.

General Instructions

Section references are to the Internal

Revenue Code unless otherwise noted.

● More than one of the credits included in

the general business credit listed below,

● A carryback or carryforward of any of the

credits,

● A credit from a passive activity, or

● General credits from an electing large

partnership (Schedule K-1 (Form 1065-B)).

Complete Form 3800, General Business

Credit, instead of completing Part II of Form

8846, to figure the tax liability limit for the

credit if for this year you have:

Note: For services performed before 1997,

include only tips received from customers in

connection with providing food or beverages

for consumption on the premises of a food or

beverage establishment where tipping is

customary.

Line 12. Although you may not owe

alternative minimum tax (AMT), you generally

must still compute the tentative minimum tax

(TMT) to figure your credit. For a small

corporation exempt from the AMT under

section 55(e), enter zero. Otherwise, enter the

TMT that was figured on the appropriate AMT

form or schedule.

shareholders or partners. Attach Form 8846

to Form 1120S or 1065 and show on

Schedule K-1 each shareholder’s or partner’s

credit. Electing large partnerships, include this

credit in “general credits.”