Restaurants that serve food and beverages where tipping is customary have specific year-end reporting requirements — and Form 8027 is a big one. If you operate a large food or beverage establishment, you’re likely required to file this form annually with the IRS to report total sales, tips, and allocated tips.
Whether you’re new to this or just need a refresher, here’s a quick guide to staying compliant and avoiding costly penalties.
🧾 What Is Form 8027?
Form 8027: Employer’s Annual Information Return of Tip Income and Allocated Tips is used by large food and beverage establishments to report:
- Total gross receipts (including tips)
- Total charged tips (credit/debit card tips)
- Total reported tips by employees
- The amount of tips the employer must allocate (if applicable)
👩🍳 Who Has to File?
You must file Form 8027 if your business meets all of the following:
- It is a food or beverage establishment.
- Tipping is customary.
- You employ more than 10 employees (on a typical business day during the year).
💡 The “more than 10 employees” rule is based on a weighted average calculation across all business days in the calendar year.
📊 What’s Reported on the Form?
Here’s a breakdown of what goes on Form 8027:
| Line Item | What It Means |
|---|---|
| Total gross receipts | Includes food, beverages, and tips (excluding carry-out) |
| Charged tips | Tips paid via credit/debit cards |
| Tips reported by employees | What employees actually report (via Form 4070 or equivalent) |
| Allocated tips (if required) | Tips the employer must “allocate” if reported tips fall short of 8% of sales |
📈 Allocated Tips: What Are They?
If total reported tips are less than 8% of your gross receipts, you’re required to allocate the difference to employees — even if those tips weren’t actually received. These allocated tips are shown on employees’ Form W-2, Box 8, but not subject to withholding.
You can allocate tips using one of three methods:
- Hours Worked Method
- Gross Receipts Method
- Good Faith Agreement
📅 When Is It Due?
Form 8027 is due by February 28 if filed on paper, or March 31 if filed electronically.
If you’re also issuing W-2s with allocated tips, make sure they’re delivered to employees by January 31.
🛠️ How to File
With the IRS’s new 10-form e-file threshold rule, most restaurants must file electronically. 1099FIRE can electronically file your 8027 data to the IRS on your behalf. Just call our main office at (480) 706-6474 to get started.
