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

Paid on Certain Employee Tips Form 8846

© Attach to your tax return.

Department of the Treasury

Internal Revenue Service

Attachment

Sequence No. 98

Name(s) shown on return Identifying number

1

1

2 2

4

4

5

6

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

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

partnerships and S corporations

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

others, report this amount on Form 3800, line 1j

3

Tips not subject to the credit provisions (see instructions)

Creditable tips. Subtract line 2 from line 1

Multiply line 3 by 7.65% (.0765). If you had any tipped employees whose wages (including tips) 

exceeded $94,200, see instructions and check here ©

5

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.

2006

Who Should File

How the Credit Is Figured

Specific Instructions

Line 2

Generally, the credit equals the

amount of employer social security

and Medicare taxes paid or incurred

by the employer on tips received by

the employee. However, the

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 included in the computation.

The Federal minimum wage rate is

$5.15 per hour.

Figure the current year credit from

your trade or business on lines 1

through 4.

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

For example, an employee worked

100 hours and received $350 in tips

for October 2006. 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 2006 is taken into account

for credit purposes.

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.

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.

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

2. During the tax year, you paid or

incurred employer social security and

Medicare taxes on those tips.

General Instructions Line 1

Section references are to the

Internal Revenue Code.

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.

If you pay each tipped employee

wages (excluding tips) equal to or

more than the Federal minimum

wage rate, enter zero on line 2.

If any tipped employee’s wages and

tips exceeded the 2006 social security

tax wage base of $94,200 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.

What’s New

● The tax liability limit is no longer

figured on this form; instead, it must

be figured on Form 3800, General

Business Credit.

● Taxpayers that are not

partnerships or S corporations, and

whose only source of this credit is

from those pass-through entities, are

not required to complete or file this

form. Instead, they can report this

credit directly on line 1j of Form

3800.

Reduce the income tax deduction for

employer social security and Medicare

taxes by the amount on line 4.

tipping of employees for delivering or

serving food or beverages is

customary.
Page 2

The time needed to complete and

file this form will vary depending on

individual circumstances. The

estimated burden for individual

taxpayers filing this form is approved

under OMB control number

1545-0074 and is included in the

estimates shown in the instructions

for their individual income tax return.

The estimated burden for all other

taxpayers who file this form is shown

below.

Recordkeeping 2 hr., 9 min.

Learning about

the law or the form 18 min.

Preparing and sending

the form to the IRS 20 min.

If you have comments concerning

the accuracy of these time estimates

or suggestions for making this form

simpler, we would be happy to hear

from you. See the instructions for the

tax return with which this form is

filed.

Form 8846 (2006)

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

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.

administration of any Internal

Revenue law. Generally, tax returns

and return information are

confidential, as required by section

6103.