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.

OMB No. 1545-1414

2010

Attachment 

Sequence No. 98

Name(s) shown on return Identifying number

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.

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% (.0765). If you had any tipped employees whose wages (including 

tips) exceeded $106,800 or were exempt from social security taxes, 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, go to line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . 6 

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

on line 6 from passive activities (see instructions) . . . . . . . . . . . . . . . . 7 

8 Subtract line 7 from line 6 . . . . . . . . . . . . . . . . . . . . . . . 8 

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

2010 from passive activities (see instructions) . . . . . . . . . . . . . . . . . 9 

10 Carryforward of the credit for employer social security and Medicare taxes paid on certain

employee tips that originated in a tax year that began after 2006 (see instructions) . . . . . 10 

11 Carryback of the credit for employer social security and Medicare taxes paid on certain

employee tips from 2011 (see instructions) . . . . . . . . . . . . . . . . . 11 

12 Add lines 8 through 11. Report this amount on Form 3800, line 29f . . . . . . . . . . 12 

General Instructions

Section references are to the Internal 

Revenue Code.

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.

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, 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 2010. 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 2010 is 

taken into account.

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.

For Paperwork Reduction Act Notice, see back of form. Cat. No. 16148Z Form 8846 (2010)
Form 8846 (2010) Page 2

Line 4

If any tipped employee’s wages and 

tips exceeded the 2010 social security 

tax wage base of $106,800 subject to 

the 6.2% rate or were exempt from 

social security taxes because you 

applied the Hiring Incentives to 

Restore Employment (HIRE) Act 

payroll tax exemption, 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. For more 

information on the HIRE Act payroll tax 

exemption, visit the IRS website at 

IRS.gov and enter the keyword HIRE 

Act.

Reduce the income tax deduction 

for employer social security and 

Medicare taxes by the amount on line 

4.

Line 7

Enter the amount included on line 6 

that is from a passive activity. 

Generally, a passive activity is a trade 

or business in which you did not 

materially participate. Rental activities 

are generally considered passive 

activities, whether or not you materially 

participate. For details, see Form 

8582-CR, Passive Activity Credit 

Limitations (for individuals, trusts, and 

estates), or Form 8810, Corporate 

Passive Activity Loss and Credit 

Limitations (for corporations).

Line 9

Enter the passive activity credit 

allowed for the 2010 credit for 

employer social security and Medicare 

taxes paid on certain employee tips 

from Form 8582-CR or Form 8810 that 

is properly taken into account for 

periods after 2006. Enter on line 5 of 

Form 3800 the credit for employer 

social security and Medicare taxes 

paid on certain employee tips from 

passive activities allowable for 2010 

that is attributable to the credit 

properly taken into account for periods 

prior to 2007.

Line 10

Use line 10 to show any carryforward 

of the credit for employer social 

security and Medicare taxes paid on 

certain employee tips from 2009. For 

carryforwards of the credit from years 

prior to 2007, show such 

carryforwards on line 6 of Form 3800.

Line 11

Use line 11 to show any carryback if 

you amend your 2010 return to carry 

back an unused credit from 2011.

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 

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 . . 3 hr., 35 min.

Learning about 

the law or the form . . . . 6 min.

Preparing and sending 

the form to the IRS . . . . 9 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.