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Form W-2, FICA, Medicare, Tips, Employee Benefits

Question: If the reported tips from employees of a large food or beverage establishment are 8% or more of sales, must an employer still allocate tips to the employees?

Answer:

No.

  • Tip allocation is only required when the amount of tips reported by employees of a large food or beverage establishment is less than 8% (or an approved lower rate) of the gross receipts (other than nonallocable receipts) for the given period.
  • If the employees are reporting 8% or more, there would be no allocated tip amount.
  • The employer must still file Form 8027 (PDF), Employer's Annual Information Return of Tip Income and Allocated Tips.
  • The employer is also still required to withhold and pay taxes with regard to all reported tips.

Additional Information:


Category: Small Business, Self-Employed, Other Business
Subcategory: Form W-2, FICA, Medicare, Tips, Employee Benefits

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
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