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

Form 8846 (2007)

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, go to line 7

3

Cat. No. 16148Z

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 $97,500, 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.

For Paperwork Reduction Act Notice, see back of form.

2007

Part I Current Year Credit

11 Add lines 8 through 10. Use this amount to complete Part II 11

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 2007 from passive activities (see instructions) 9

10

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

tips from 2008 (see instructions)

Part II Allowable Credit

12

13

14

15a

b

c

d

e

f

16

17

18

19

20a

b

c

d

e

f

21

22

12

13

14

15f

16

17

18

19

20f

21

22

20a

15a

15b

15c

15d

15e

20b

20c

20d

20e

Regular tax before credits (see instructions)

Credits from Form 1040, lines 47 through 50 and 52 through 54 (or

Form 1040NR, lines 44, 45, and 47 through 49)

Alternative minimum tax (see instructions)

Add lines 12 and 13

Foreign tax credit

Credits from Forms 5735 and 8834

Non-business alternative motor vehicle credit (Form 8910, line 18)

Non-business alternative fuel vehicle refueling property credit (Form

8911, line 19)

General business credit (Form 3800, line 19)

Empowerment zone and renewal community employment credit

(Form 8844, line 26)

Work opportunity credit (Form 5884, line 22)

Renewable electricity, refined coal, and Indian coal production

credit (Form 8835, line 36)

Alcohol fuels credit (Form 6478, line 24)

Add lines 15a through 15e

Net income tax. Subtract line 15f from line 14. If zero, skip lines 17 through 20 and enter -0-

on line 21

Net regular tax. Subtract line 15f from line 12. If zero or less, enter -0-

Enter 25% (.25) of the excess, if any, of line 17 over $25,000 (see instructions)

Subtract line 18 from line 16. If zero or less, enter -0-

Add lines 20a through 20e

Subtract line 20f from line 19. If zero or less, enter -0-

Credit allowed for the current year. Enter the smaller of line 11 or 21. Report this amount

on Form 1040, line 55; Form 1040NR, line 50; Form 1120, Schedule J, line 5c; or the

applicable line of your return. If line 21 is smaller than line 11, see instructions
Form 8846 (2007) Page 2

Who Should File

How the Credit Is Figured

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 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.

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 $450 in tips

for October 2007. The worker

received $375 in wages (excluding

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.

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

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.

General Instructions

Section references are to the

Internal Revenue Code.

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 $5.15 an hour enter zero

on line 2.

Reduce the income tax deduction for

employer social security and Medicare

taxes by the amount on line 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.

If any tipped employee’s wages and

tips exceeded the 2007 social security

tax wage base of $97,500 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 .0765.

Then, multiply the tips subject only to

the Medicare tax by .0145. Enter the

sum of these amounts on line 4.

Specific Instructions

Figure the current year credit from

your trade or business on lines 1

through 4.

Part I. Current Year Credit

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 2007 credit for

employer social security and

Medicare taxes paid on certain

employee tips from Form 8582-CR or

Form 8810.

Line 10

Use line 10 to show any carryback if

you amend your 2007 return to carry

back an unused credit from 2008.

Part II. Allowable Credit

Line 13

The credit allowed for the current

year may be limited based on your

tax liability. Use Part II to figure the

allowable credit.

Enter the alternative minimum tax

(AMT) from the following line of the

appropriate form or schedule.

Line 12

Enter the regular tax before credits

from the following line of the

appropriate form or schedule.

● Individuals: Form 1040, line 44;

Form 1040NR, line 41.

● Corporations: Form 1120,

Schedule J, line 2; or the applicable

line of your return.

● Estates and trusts: The sum of the

amounts from Form 1041, Schedule

G, lines 1a and 1b; or the amount

from the applicable line of your

return.

● Individuals: Form 6251, line 35.

● Corporations: Form 4626, line 14.

● Estates and trusts: Form 1041,

Schedule I, line 56.

What’s New

● For tax years beginning after

December 31, 2006, there is no

longer an alternative minimum tax

limitation with respect to this credit.

You must complete Part II of the

form to compute the allowable credit.

Note. Report any carryforward from

2006 of the credit for employer social

security and Medicare taxes paid on

certain employee tips on the Form

3800 carryforward line.

● The minimum wage in effect on

January 1, 2007, $5.15 an hour, is

used to figure the credit even if the

federal minimum wage increases.

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 2007 is taken into

account.
Page 3

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 8 hr., 22 min.

Learning about

the law or the form 12 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 (2007)

Paperwork Reduction Act Notice.

We ask for the information on this

form to carry out the Internal

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.

Line 22

If you cannot use all of the credit

because of the tax liability limit, carry

the unused credit back 1 year then

forward up to 20 years. When carrying

back the credit from 2007 to 2006, use

the 2006 Form 6478, Credit for Alcohol

Used as Fuel, line 10, and enter “T” to

the left of the entry space.

Line 18

See section 38(c)(5) for special rules

that apply to married couples filing

separate returns, controlled corporate

groups, regulated investment

companies, real estate investment

trusts, and estates and trusts.

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.

The time needed to complete and

file this form will vary depending on

individual circumstances. The