What Is IRS Form 8027?

A server waits on a table of customers.

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Form 8027 is an IRS document certain food service businesses use to report their employees' tips to the IRS each year.

Key Takeaways

  • Form 8027 reports allocated tips, as well as tips received, to the IRS so the agency can confirm that the right amount of taxes was withheld from employees’ pay.
  • Employers must allocate tips to workers if their total reported tips don’t amount to 8% or more of the restaurant’s gross sales for the month.
  • The 8% allocated tip threshold can be reduced by application to and approval by the IRS, but not be below 2%.
  • Fast-food restaurants are exempt from filing Form 8027 because their employees don’t typically receive tips.

How Form 8027 Works

IRS Form 8027 provides a record of tips received by employees of bigger food service businesses. Employees who make at least $20 a month in tips must report their tips to their employers by completing and providing the employer with Form 4070 each month. Form 4070 is due by the 10th day of each month for tips received in the preceding month.

Employers can use the reported tips from Forms 4070 to figure out how much to report on Form 8027. The IRS uses the form to verify the tips received for the year and to make sure employers are withholding the correct amount of taxes based on reported tips. If the total tips your team reports are less than 8% of your business’s gross sales for the month, then you need to allocate tips to employees who reported tips of less than 8% of their sales.

Form 8027


Who Uses Form 8027?

The IRS has established qualifying criteria to determine which businesses need to file Form 8027:

  • The business is located in the United States.
  • The business has workers who usually get tips.
  • The business employs more than 10 workers.


The IRS draws a line between restaurants and fast-food enterprises. Typical drive-through fast-food places don’t have to file Forms 8027. Generally, employees at fast-food restaurants don’t typically receive tips.

“More than 10 workers” is based on the average number of hours worked in a typical business day. These employees generally include bartenders, waitstaff, and bussers, but not coat-check staff or door staff.

You must file a Form 8027 for each of your qualifying businesses if you have more than one, even if they’re housed within the same building. For example, if a hotel has a bar or lounge, a restaurant, and a coffee shop, the hotel owner must file Form 8027 for each.

How To Fill Out Form 8027

You may want the help of a tax professional to prepare your Form 8027. However, the form isn’t all that complicated. The form’s instructions provide line-by-line help:

  • Lines 1 and 2: These are for use if your establishment accepts credit cards, debit cards, or other types of charges.
  • Line 3: Enter any service charges of less than 10% that you paid to your employees.
  • Lines 4a-4c: Total tips paid indirectly and directly to your employees
  • Lines 5 and 6: You’ll report on Line 5 your total receipts for food and beverages for the year, then multiply it by the rate in Line 6.
  • Lines 7 a, b, and c: These lines are dedicated to determining your tip allocation, if any.
  • Line 8: Enter the number of your directly-tipped employees who worked at this establishment.

If You Must Allocate Tips

Review the Forms 4070 that your tipped employees gave you each month. You must allocate or assign tips to your employees to reach 8% of your gross receipts for the month if they report less than that percentage on their Forms 4070.

The IRS explains the three methods you can use for tip allocation on instructions for Form 8027 as well.

You must also add these allocated tips to your employees’ W-2 forms because they’re taxed on these amounts. This income is not subject to withholding as long as you can prove you received less tips than were allocated to you.


You can file a petition with the IRS asking to lower the allocation percentage from 8% (the minimum is 2%). Attach the approval to your Form 8027 when you file it if the IRS grants one to you. Use the approved percentage when you complete Lines 6 and 7 of Form 8027.

Other Requirements for Filing Form 8027

If you need to file 250 or more, you must e-file them. The IRS recommends that you retain all records you used to complete Form 8027 for three years after the due date of that year’s tax return or up to two years after you pay your tax, whichever is greater.

Frequently Asked Questions (FAQs)

If you request an extension of time to file Form 8027, when is it due?

Form 8027 is typically due to the IRS by late February of the year following the tax year if you’re mailing in the form. You generally have until late March if you file electronically. You can ask for an extension of time by filing Form 8809 by these dates if you don’t think you can complete your Forms 8027 on time. You can’t file Form 8809 before Jan. 1, but you can do it online. The form gives you an additional 30 days to file.

What is the penalty for filing Form 8027 late?

The IRS imposes a $50 penalty for “failure to file timely” a Form 8027 information return. This drops to $15 if you file on or within 30 days of the due date, or to $30 if you file after 30 days but on or before Aug. 1.

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  1. IRS. “Form 4070: Employee’s Report of Tips to Employer.” Page 2.

  2. IRS. “Instructions for Form 8027 (2022).” Select “Allocation of Tips.”

  3. IRS. “Instructions for Form 8027 (2022).” Select “Worksheet for Determining if You Must File Form 8027 for Calendar Year 2022.”

  4. IRS. “Form 8027: Employer’s Annual Information Return of Tip Income and Allocated Tips.” Page 1.

  5. IRS. “Instructions for Form 8027 (2022).” Select “Reminders.”

  6. IRS. “How Long Should I Keep Records?

  7. IRS. “Instructions for Form 8027 (2022).” Select “When To File.”

  8. IRS. “About Form 8809, Application for Extension of Time To File Information Returns.”

  9. Cornell Law School Legal Information Institute. “26 CFR § 301.6721-1—Failure To File Correct Information Returns.”

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