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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?
- 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.
- Publication 1239 (PDF), Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, Electronically
- Reporting Tip Income - The Jill and Jason Show
- Publication 1244 (PDF), Employee's Daily Record of Tips and Report to Employer
- Publication 15, (Circular E), Employer's Tax Guide
- Instructions for Form 8027 (PDF), Employer's Annual Information Return of Tip Income and Allocated Tips
- Publication 531, Reporting Tip Income
Category: Small Business, Self-Employed, Other Business
Subcategory: Form W-2, FICA, Medicare, Tips, Employee Benefits