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Update on Tax vs. Wage Changes- IRS Due Date looming for Filing Form 8027

February 13, 2014

Employer's Annual Information Return of Tip Income and Allocated Tips

Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, is an IRS disclosure report to be submitted by large food and/or beverage establishments where tipping is a customary practice.

Large employers must report this calculation to the IRS annually by February 28th for the preceding year or, for electronic submissions, by March 31st. A 30-day extension of time to file may be requested, if necessary.

To determine if your establishment is considered large, it is necessary to follow an IRS computation of the average number of employee hours worked on a typical business day for the preceding year (2012). If the computation results in more than 10 employees on average per day, then filing of Form 8027 is required.

To complete the form, employers will need calendar year amounts of allocable gross receipts, credit card charge receipts, credit card charge tips, and total tips reported by tipped employees. If total tips reported by employees is less than 8% of allocable gross receipts, the employer must assess tips to employees based on an IRS formula and add the amounts to employees' W-2's.

NEW FOR 2014: Allocable gross receipts as of January 1, 2014, should exclude receipts related to automatic gratuities. Automatic gratuities are now included in wages rather than tips. Therefore, it is important to exclude the related receipts that may skew the tip percentage.

For help completing the required calculations or Form 8027 please contact the KLR Hospitality Services Group or email

Read more on the Tax vs. Wage Changes: How the IRS Rule Change on Automatic Tips Could Impact Restaurants, Tip vs. Wage Changes

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