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 (1996)

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 $62,700, check here ©

a

b

Shareholder

Partner

If you are a—

5

Then enter Form 8846 credit(s) from—

Schedule K-1 (Form 1065) lines 13c, 13d, or 14

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

Paperwork Reduction Act

Notice

We ask for the information on this form to

carry out the Internal Revenue laws of the

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 38

● 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 10) 8a

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

d Foreign tax credit (Form 1116, line 32, or Form 1118, Sch. B, line 12) 8d

e Possessions tax credit (Form 5735) 8e

8f f

g 8g

Credit for fuel from a nonconventional source

h

Qualified electric vehicle credit (Form 8834, line 19)

Add lines 8a through 8g 8h

9 Net regular tax. Subtract line 8h 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 41

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 42; 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

%

%

c Mortgage interest credit (Form 8396, line 11) 8c

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

96

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.

Section references are to the Internal

Revenue Code.

General Instructions 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.
Form 8846 (1996) 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 12.—Enter the tentative minimum tax

(TMT) that was figured on the appropriate

alternative minimum tax (AMT) form or

schedule. Although you may not owe AMT,

you must still compute the TMT to figure

your credit.

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 part of the

credit because of the tax liability limit (line

15 is smaller than line 6), carry the excess

back 3 years, and then forward for

15 years. See the separate Instructions for

Form 3800 for details.

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 used in the

computation. The Federal minimum wage

rate is $4.25 per hour through September

30, 1996; $4.75 per hour from October 1,

1996, through August 31, 1997; and $5.15

per hour beginning September 1, 1997.

If for this year you have more than one of

the credits included in the general

business credit listed below, a carryback

or carryforward of any of the credits, or a

credit from a passive activity, you must

complete Form 3800, General Business

Credit, instead of completing Part II of

Form 8846 to figure the tax liability

limitation.

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 1996 social security

tax wage base of $62,700 subject to the

6.2% (.062) 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% (.0145).

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 1996. The worker received $325 in

wages (excluding tips) at the rate of $3.25

an hour. Because the Federal minimum

wage rate was $4.75 an hour, the

employee would have received wages,

excluding tips, of $475 had the employee

been paid at the Federal minimum wage

rate. Thus, only $200 of the employee’s

tips for October 1996 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)

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.

● 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 6 hr., 28 min.

Learning about

the law or the form 18 min.

Preparing and sending

the form to the IRS 25 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. You

can write to the IRS at the address listed

in the instructions for the tax return with

which this form is filed.

Changes To Note

Under the Small Business Job Protection

Act of 1996, employee tips eligible for the

credit include:

1. Tips for services performed before

1994 on which employer social security

and Medicare taxes were paid or incurred

after 1993.

2. Tips not reported to the employer but

on which employer social security and

Medicare taxes were paid or incurred after

1993 (e.g., because of an IRS examination

of your employment tax returns).

3. Tips for services performed after 1996

in connection with providing food or

beverages consumed off the premises (if

tipping is customary) on which employer

social security and Medicare taxes are

paid or incurred.

Note: If for 1994 or 1995 you paid or

incurred the employer taxes described in 1

or 2 above, file an amended return for the

appropriate year to claim any credit

resulting from these changes.

Employers who meet both of the following

conditions should file Form 8846:

1. You had employees who received tips

from customers for providing food or

beverages for consumption on the

premises of an establishment where

tipping is customary. For services

performed after 1996, the food or

beverages are no longer required to be

provided for consumption on the premises.

Instead, your employees must have

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. 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.

For services performed after 1996, 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),

actually paid to the employee during the

month. Enter on line 2 the total amounts

figured for all employees.