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

Current Year Credit

1

1

2 2

4

4

5

6

Allowable Credit (See Who must file Form 3800 to find out if you complete Part II or file Form 3800.)

Form 8846 (2003)

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

pass-through entities:

6 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

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

exceeded $87,000, see instructions and check here 

a

b

Shareholder

Partner

If you are a—

5

Then enter the Form 8846 credits 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.

For Paperwork Reduction Act Notice, see back of form.

● Individuals. Enter the amount from Form 1040, line 41

7

Corporations. Enter the amount from Form 1120, Schedule J, line 3; Form 1120-A,

Part I, line 1; or the applicable line of your return

●

●

10a 10a

Credit for child and dependent care expenses (Form 2441, line 11) 10b

Credit for the elderly or the disabled (Schedule R (Form 1040), line 24)

b

10d

Foreign tax credit

d

e 10e

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

10f f

10g g

Credit for fuel from a nonconventional source

h

Qualified electric vehicle credit (Form 8834, line 20)

Add lines 10a through 10l 10m

11 Net income tax. Subtract line 10m from line 9. If zero, skip lines 12 through 15 and enter -0- on line 16 11

8 Alternative minimum tax:

● Individuals. Enter the amount from Form 6251, line 35

● Corporations. Enter the amount from Form 4626, line 14 8

● Estates and trusts. Enter the amount from Form 1041, Schedule I, line 56

14 Tentative minimum tax (see instructions):

● Individuals. Enter the amount from Form 6251, line 33

12

● Corporations. Enter the amount from Form 4626, line 12

● Estates and trusts. Enter the amount from Form 1041,

Schedule I, line 54

12

Enter 25% (.25) of the excess, if any, of line 12 over $25,000 (see instructions)

15

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

15

16

Credit allowed for the current year. Enter the smaller of line 6 or line 16 (if line 16 is smaller, see

instructions). Also include this amount on Form 1040, line 52; Form 1120, Schedule J, line 6d; Form

1120-A, Part I, line 2a; Form 1041, Schedule G, line 2c; or the applicable line of your return 17



Mortgage interest credit (Form 8396, line 11)

c 10c

7 Regular tax before credits:

9 Add lines 7 and 8 9

13

Enter the greater of line 13 or line 14

13

14

i

Adoption credit (Form 8839, line 18) 10h

District of Columbia first-time homebuyer credit (Form 8859, line 11) 10i

j

k

l

Child tax credit (Form 1040, line 49)

Education credits (Form 8863, line 18)

10j

10k

Estates and trusts. Enter the sum of the amounts from Form 1041, Schedule G, lines 1a

and 1b, or the amount from the applicable line of your return

Net regular tax. Subtract line 10m from line 7. If zero or less, enter -0-

17

16



10l

m

Credit for qualified retirement savings contributions (Form 8880, line 14)

2003
Form 8846 (2003) Page 2

Who Should File

How the Credit Is Figured

Who must file Form 3800. You must file

Form 3800 if you have:

Specific Instructions

Line 2

S Corporations and Partnerships

Line 13

Line 17

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.

Skip lines 1 through 4 if you are only

claiming 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

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 2003. 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 2003 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.

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 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.”

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 8 hr., 7 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

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.

General Instructions

Section references are to the Internal

Revenue Code unless otherwise noted.

● A credit for employer social security and

Medicare taxes paid on certain employee

tips from a passive activity,

● More than one credit included in the

general business credit (other than a credit

from Form 8844 or 8884), or

Line 14

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 2003 social security tax

wage base of $87,000 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.

If you cannot use all of the credit because

of the tax liability limit (line 16 is smaller

than line 6), carry the unused credit back 1

year then forward up to 20 years. See the

instructions for Form 3800 for details.

See section 38(c)(4) for special rules that

apply to married couples filing separate

returns, controlled groups, regulated

investment companies, real estate

investment trusts, and estates and trusts.

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,

complete and attach the applicable AMT

form or schedule and enter the TMT on

line 14.

Part II—Allowable Credit

The credit allowed for the current year may

be limited based on your tax liability. Use

Part II to figure the allowable credit unless

you must file Form 3800, General Business

Credit.

● A carryback or carryforward of any of

those credits.

See the instructions for Form 3800 for a

list of credits included in the general

business credit.