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Part 3. Submission Processing

Chapter 11. Returns and Documents Analysis

Section 180. Allocated Tips

3.11.180  Allocated Tips

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3.11.180.1  (01-01-2010)
General Information

  1. An employer who operates a large food and beverage establishment is required to file Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, to report information concerning receipts from the establishment and tips reported by employees. In certain circumstances, the employer is required to allocate tips to employees.

  2. Paper Forms 8027 must be filed by the last day of February of the year following the calendar year for which the return is filed. See Exhibit 3.11.180-1 for an example of Form 8027. This is an annual return.

    Exception:

    Employers participating in the Gaming Industry Tip Compliance Agreement (GITCA) Program may not have to file Form 8027. See Revenue Procedure (Rev. Proc.) 2007-32, published in 2007-22 Internal Revenue Bulletin (IRB) 1322. The GITCA Program was established by Revenue Procedure 2003-35, 2003-1 Cumulative Bulletin (CB) 919, in May 2003. Revenue Procedure 2007-32 provides an updated model Gaming Industry Tip Compliance Agreement for use by the IRS and gaming industry employers and supersedes Rev. Proc. 2003-35.

  3. Electronically filed Forms 8027 are due by March 31 of the year following the calendar year for which the return is filed.

  4. Form 8027 is required only for establishments that are located in the 50 states and the District of Columbia. The Form 8027 is not required for:

    • Establishments operated for less than one month in any calendar year or has less than ten (10) employees.

    • Establishments where tipping is not customary (e.g., cafeterias).

    • Establishments where 95% of total sales are carryout sales or sales with a service charge of 10% or more.

    .

  5. An employer must also complete and file Form 8027-T, Transmittal of Employer's Annual Information Return of Tip Income and Allocated Tips , if information is reported for more than one establishment. See Exhibit 3.11.180-2 for an example of Form 8027-T.

  6. All paper Forms 8027 (along with transmittal Forms 8027-T if more than one establishment is reported) are filed and processed at the Cincinnati Submission Processing Campus (CSPC).

  7. Form 8027 secured by Stakeholder Liaison is submitted via Form 3210, Document Transmittal.

  8. Enterprise Computing Center-Martinsburg (ECC-MTB) is responsible for processing electronic submissions.

  9. The Program Code 80310 is used by Code and Edit and Error Resolution System (ERS) for processing Form 8027.

  10. For processing year 2010, only tax year 2009 Form 8027 and tax year 2008 Form 8027 submitted after their 2009 filing due date will be processed.

  11. All 2007 and prior Forms 8027 should be sent to the following address; unless the form meets the criteria in IRM 3.11.180.1(13).
    Internal Revenue Service
    Attn. NTRCP Senior Policy Analyst/iv
    3251 North Evergreen Drive NE
    Grand Rapids, MI 49525.

  12. Use Letter 1858C to correspond for missing or inconsistent information. The current version of this letter is available on Servicewide Electronic Research Program (SERP).

  13. If the Form 8027 has any of the following notations (including 2007 and prior):

    • Under TRDA/Tip Rate Determination Agreement,

    • Under GITCA/Gaming Industry Tip Compliance Agreement,

    • Under TRAC/Tip Reporting Alternative Commitment,

    • Under Revenue Procedure (Rev. Proc.) 2007-32,

    • Under Revenue Procedure (Rev. Proc.) 2003-35; mail to:
      Internal Revenue Service
      Attn. National Tip Reporting Compliance Analyst
      110 City Parkway
      Las Vegas, NV 89106      .

    Note:

    Following receipt of Forms 8027, the National Tip Reporting Compliance Analyst will separate out all Forms 8027 that were submitted by Indian tribal government entities and mail them to the Indian Tribal Government (ITG) Tip Coordinator at the following address:
    Internal Revenue Service
    MS 7200 PHX: ITG Tip Coordinator
    4041 N Central Ave Ste 112
    Phoenix, AZ 85012.

  14. Route documents that cannot be perfected and processed to the National Tip Reporting Compliance Program (NTRCP) for special handling:
    Internal Revenue Service
    Attn. NTRCP Senior Policy Analyst/iv
    3251 North Evergreen Drive NE
    Grand Rapids, MI 49525.

  15. Form 8027 does not post to Master File, so Form 8027 will not be on the Cycle Proof List (CPL) or Automated Cycle Proof List (ACPL).

  16. IRM 3.11.180 is exempt from the BMF Consistency Guidelines (indicating diamonds) as shown in other 3.11 Series IRMs and 3.12 Series IRMs.

3.11.180.1.1  (01-01-2010)
IRS Employee Contacts - Section 3705(a)

  1. The Restructuring and Reform Act of 1998 (RRA 98), Section 3705 provides identification requirements for all IRS employees working tax-related matters. IRS employees are required to give their name and unique identification number during taxpayer telephone, face to face and written contact. In addition, a telephone number is required on all taxpayer correspondence. This will provide taxpayers with enough information to identify an IRS employee who has previously assisted with tax-related matters.

  2. All IRS employees, in the field, Headquarters and area, who communicate, by telephone, face to face, or correspondence with taxpayers or their personal authorized representatives, on tax-related matters, are required to provide (at a minimum) the following information:

    • Their title (e.g., Mr., Mrs., Ms., Miss),

    • Their last name, and

    • Their Identification (ID) card (badge) number.

  3. Correspondence – All correspondence must include a telephone number where the taxpayer's question can be answered. In addition, manually-generated and handwritten correspondence must include the following information:

    • Their title (e.g., Mr., Mrs., Ms., Miss),

    • Their last name, and

    • Their Integrated Data Retrieval System (IDRS) number or ID card (badge) number.

  4. The IDRS number is automatically generated. If it is not generated, or a handwritten note is prepared, the ID card (badge) number must be used. Toll-free employees may also provide their location for identification purposes. Facsimiles (faxes) to taxpayers on tax-related matters, are considered manually-generated correspondence and must include the required information.

    Caution:

    E-mail cannot be used to transmit taxpayer account information.

  5. Correspondence, whether sent directly to the taxpayer or to the taxpayer's personal authorized representative, must contain the required information.

  6. When a taxpayer requests to speak with a specific employee who previously handled his or her inquiry or request, or complains about the level of service previously provided, every attempt should be made to resolve the taxpayer's inquiry. If the issue cannot be resolved, the employee should refer the inquiry using established procedures to his or her manager.

  7. Correspondex letters will require a specific employee name and telephone number only if the employee initiating the correspondence is in the best position to respond to any questions that the taxpayer may have about the correspondence, or the employee is asking the taxpayer to provide additional case-related information.

  8. Otherwise, if the taxpayer does not need to contact a specific employee, the correspondence needs only an IRS telephone number and standard signature.

  9. Secretaries, receptionists or other people who answer the telephone in functional offices need to identify themselves. They should provide their ID card (badge) number only if they are answering telephones which are routinely used to provide tax account information.

  10. It is not necessary to repeat the ID card (badge) number on a subsequent contact, when the nature of an employee's work involves multiple contacts with the same taxpayer, and the employee has given the taxpayer (either by telephone or in-person) his or her ID card (badge) number on the first contact.

  11. Prior to faxing confidential information to the taxpayer, review fax procedures contained in IRM 11.3.1.10, Facsimile Transmission of Tax Information.

  12. During taxpayer contact, if taxpayer mentions hardship or asks to be referred to Taxpayer Advocate Service (TAS), see IRM 3.11.180.1.4.

3.11.180.1.2  (01-01-2010)
Definitions

  1. Allocated Tips - An employer must allocate tips among employees who receive tips if the total tips reported to the employer during any payroll period are less than 8 percent of the employer's gross receipts for that period. Generally, the amount allocated is the difference between the total tips reported by employees and 8 percent of the gross receipts, other than nonallocable receipts.

  2. Determination Letter - A letter from the IRS authorizing an allocation rate of less than 8% but not lower than 2%. This letter must be attached to the submission if the allocation rate is lower than 8%.

  3. Employer - The entity listed on Form W-2 (Wage and Tax Statement) and Form 941 (Employer's QUARTERLY Federal Tax Return) reporting wages and taxes for employees. Each employer would have a unique employer identification number (EIN) as assigned by IRS and established on the Business Master File (BMF).

  4. Establishment - The unique name for each large food or beverage operation that meets the requirements for filing Form 8027.

  5. Establishment Number (EN) - A unique 5 digit number for each establishment. The employer should assign a unique number for each establishment or we should assign a sequential number during processing, beginning with "1."

  6. Type of Establishment - Establishments are categorized as:

    • An establishment that serves evening meals only (with or without alcoholic beverages).

    • An establishment that serves evening meals and other meals (with or without alcoholic beverages).

    • An establishment that serves only meals other than evening meals (with or without alcoholic beverages).

    • An establishment that serves food, if at all, only as an incidental part of the business of serving alcoholic beverages.

  7. Good-Faith Agreement (GFA) - A written agreement between the employer and at least two-thirds of the employees of each occupational category of employees who receive tips (e.g., waiters and waitresses, busboys, maitre d's) working in the establishment when the agreement is adopted which provides for a tip allocation among tipped employees in a manner that, in combination with the tips reported by such employees, will reflect a good faith approximation of the actual distribution of tip income among such tipped employees.

3.11.180.1.3  (01-01-2010)
Document Review

  1. Form 8027 may be received as a single submission for an establishment, or an employer may use Form 8027-T to submit multiple Forms 8027.

  2. Keep multiple Forms 8027 in Establishment Number order (if present). Arrange from the lowest to highest number if the employer has not already done so. Breaks in the sequence numbers are allowed. Attach the Form 8027-T to the first Form 8027 in the set of multiples.

  3. If a multiple Form 8027 submission has to be split during batching, photocopy the Form 8027-T and any attachments that are used for more than one establishment. Attach the copies to the next Form 8027 for that employer.

    Note:

    After photocopying and attaching the Form 8027-T to Form 8027, never detach.

  4. If two or more Forms 8027 appear to show the same employer, and no Form 8027-T is present, treat these as single submissions. Do not correspond.

  5. Returns secured by Stakeholder Liaison may include an explanation for late filing. See IRM 3.11.180.2.1.3(10)(c) for instructions on determining reasonable cause.

  6. Verify the count shown in the Form 8027-T "Number of accompanying Forms 8027 box."

    1. If there are fewer Forms 8027 than the number shown on Form 8027–T, notify the employer using Letter 1858C. Include the paragraph that mentions the "Number of accompanying Forms 8027." See IRM 3.11.180.2.3 for Correspondence Preparation instructions.

    2. Make sure there are no duplicate Forms 8027. Any duplicates (exact copies) should be destroyed using the guidelines for classified waste.

    3. Correct the count based on the number of original Forms 8027 received and continue processing the forms.

  7. Original and corrected returns may be in the same batch.

  8. See Exhibit 3.11.180-5 for guidelines on attachments.

  9. If a Form 8027 has a list of establishments attached, or if more than one establishment's data is present on one Form 8027, correspond with the employer to request a proper submission.

    1. Use Letter 1858C and include the paragraph that requests a separate Form 8027 for each establishment. Without a separate form, the submission is considered to be unfiled and a Failure to File penalty may apply. See IRM 3.11.180.2.3 for Correspondence Preparation instructions.

    2. Place the Form 8027 in a suspense file and allow 45 days for a response.

    3. If undeliverable or no response is received after 45 days , write "No Response - Separate Forms 8027 Needed" in the upper left margin/side of the return. Penalty Assessment consideration - Incomplete Filing. The penalty for Failure to File must be assessed. See IRM 3.11.180.2.5. Continue processing.

  10. If a Form 8027 contains a foreign address for the establishment address, route to National Tip Reporting Compliance for special handling. Reporting is required only for establishments located in the United States and the District of Columbia.

    Caution:

    If a foreign address is shown only for the employer address, the Form 8027 is processable.

  11. Requests for forms. If the taxpayer states on the return or an attachment to the return that tax forms and/or schedules are requested, prepare Form 4190, Order Blank for Tax Forms and Publications , for current year tax forms and/or Form 6112, Prior Year Tax Products Order Form, for prior year tax forms. Forward the request to the Forms Distribution Center.

    Note:

    Form 4190 and Form 6112 are generally used in the Code and Edit function for IMF requests. Therefore, all BMF requests for forms and/or schedules should be entered in the "write-ins" portion of the forms. This will shorten the time frame when the taxpayer's requests for forms/schedules are identified.

  12. Petitions to Reduce the Tip Rate and User Fee. If a petition to lower the tip rate is received:

    1. Immediately hand carry any remittance to your manager.

    2. Send the petition package and copies of Forms 8027 (if included) to:
      Internal Revenue Service
      Attn. National Tip Reporting Compliance Program
      3251 North Evergreen Drive NE
      Grand Rapids, MI 49525.

      Note:

      Include a statement that indicates the payment amount, method of payment (check or money order), and the date submitted to your manager.

3.11.180.1.4  (01-01-2010)
Taxpayer Advocate Service (TAS)

  1. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.

  2. Refer taxpayers to the Taxpayer Advocate Service (TAS) (see IRM Part 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7, TAS Case Criteria) and you can’t resolve the taxpayer’s issue the same day. The definition of "same day" is within 24 hours. "Same day" cases include cases you can completely resolve in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issue. Do not refer these cases to TAS unless they meet TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4, Same-Day Resolution by Operations. When referring cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), and forward it to TAS in accordance with your local procedures.

  3. The following subsection provides information for Taxpayer Advocate Service (TAS) -.Service Level Agreement (SLA).

3.11.180.1.4.1  (01-01-2010)
Taxpayer Advocate Service (TAS) - Service Level Agreement (SLA)

  1. The National Taxpayer Advocate has reached agreements with the Commissioners of the Wage & Investment (W&I) Division, Small Business & Self-Employed (SB/SE) Division, Tax Exempt & Government Entities (TE/GE) Division, Criminal Investigation (CI), Appeals and Large & Mid-Size Business (LMSB) Division, that outline the procedures and responsibilities for the processing of Taxpayer Advocate Service (TAS) casework when either the statutory or delegated authority to complete case transactions rests outside of TAS. These agreements are known as Service Level Agreements (SLAs).

  2. The SLAs are located at http://tas.web.irs.gov under the heading "Policy/Procedures/Guidance" .

3.11.180.2  (01-01-2010)
Code and Edit Instructions

  1. Complete Code and Edit procedures on the entire return to identify all items needing correspondence. The exception is "Not Liable" returns. See IRM 3.11.180.2.1.1 for Special Return Code instructions.

    1. A Form 8027 that is annotated as being not liable to file will be processed in abbreviated format. Lines 1 through 7 (money fields) and Line 8 (number of directly tipped employees) will not be edited. Correspondence will not be initiated, and penalties will not apply.

    2. A Form 8027 that appears to be both "Final" and "Not Liable," should be treated as "Not Liable." See IRM 3.11.180.2.1.1 for Special Return Code instructions.

3.11.180.2.1  (01-01-2010)
Coding and Editing - Specific Field Action

  1. The required coding and editing actions for each field and/or line item are described in the following sections.

3.11.180.2.1.1  (01-01-2010)
Special Return Code

  1. The Attributed Tip Income Program (ATIP) check box was added to the Form 8027 starting in tax year 2006.

    Note:

    The ATIP established by Revenue Procedure 2006-30 was a pilot program available for the three calendar years beginning on or after January 1, 2007. ATIP has been extended.

  2. Edit an alpha "T," "F," or "N" to the immediate right of the "Final Return" box, per the following:

    1. "T" - Tip Reporting Program participant (box for Rev. Proc. 2006-30 (Internal Revenue Bulletin 2006-31 (dated July 31, 2006), Page 110) is checked).

      Note:

      The Special Return Code "T" indicates Attributed Tip Income Program or ATIP participation.

    2. "F" - Final return (e.g., "Final Return" box checked) with money amounts.

    3. "N" - Final return with no money amounts or "Not Liable" return with no money amounts.

      Note:

      A Form 8027 that appears to be both "Final" and "Not Liable," should be treated as "Not Liable."

    4. If more than one condition above is reported, enter one code using this priority: T (1st), F (2nd), N (3rd). The "Note" above is the exception to this priority.

  3. Leave blank, if none of the above applies.

3.11.180.2.1.2  (01-01-2010)
Tax Year

  1. For processing year 2010, only tax year 2009 Forms 8027 and tax year 2008 Forms 8027 submitted after their 2009 filing due date will be processed.

  2. All 2007 and prior Forms 8027 should be sent to the following address; unless the form meets the criteria in IRM 3.11.180.1(13).
    Internal Revenue Service
    Attn. NTRCP Senior Policy Analyst/iv
    3251 North Evergreen Drive NE
    Grand Rapids, MI 49525.

  3. Form 8027 is for a calendar year and is not required for establishments that operated for less than a month in any calendar year.

    Note:

    If there is clear indication that the establishment operated for less than a month in a calendar year, route the form to National Tip Reporting Compliance for special handling.

  4. There is no need to edit the current tax year, since it is computer generated.

  5. If a Form 8027 is filed with an indication that the information is not for the year printed on the form, determine the tax year. If the information is for tax year 2008, circle the printed year and edit the two digit year (08).

    Note:

    A tax year may be edited in a four digit format (YYYY) which defines the year in which the period ends. The Integrated Submission and Remittance Processing (ISRP) input screen is programmed to establish "20" as the century in the tax period field. Therefore, only the last two digits are required in the Code and Edit function.

  6. If a Form 8027 is filed for tax year 2008 and the information is on the correct form, underline the tax year.

  7. If a Form 8027 is an early (future tax year) filed return, check the return and attachments for the correct tax period. Correct any coding or transcription errors.

    1. For non-final returns, if the tax period is more than three months but less than one year from the current date, correspond for confirmation of the tax year.

    2. If the return is a "Final" , hold the return until the next processing year.

3.11.180.2.1.3  (01-01-2010)
Received Date

  1. The legal due date for paper Form 8027 is the last day of February of the year following the calendar year for which the return is filed. Electronically filed Form 8027 is due by March 31 of the year following the calendar year for which the return is filed.

  2. A return is considered timely if:

    1. Received within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If the due date falls on a weekend or legal holiday, the return is timely if postmarked by the first business day following the weekend or legal holiday.

    2. An extension of time to file has been granted and the return is filed by the extended due date as indicated in an attached Letter 2519 (CG).

    3. Received with an explanation that the return is late due to a failed attempt to file electronically, if received within 10 days of the denial of the electronic filing.

  3. Determine timeliness as follows:

    If Then
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 1. Do not edit the received date.

    2. Do not assess the penalty for Failure to File timely.
    An extension of time to file has been granted and the return is received by the extended due date.

    Note:

    See IRM 3.11.180.2.1.3.1 for instructions regarding extensions of time to file Form 8027.

    The filer explains that the return is late due to a failed attempt to file electronically and the paper return is received within 10 days of the denial of the electronic filing.

  4. A received date is required on all delinquent Form 8027 returns.

  5. Returns that do not meet the requirements for timely filing, as indicated in (2) above, are considered delinquent. Edit the received date to agree with the postmark date if the IRS received date stamp ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the postmark or shipment date is on or before the due date.

  6. The received date may or may not be stamped on the face of the return.

    Reminder:

    If a received date is present on a timely filed return, circle out the received date.

  7. If the date stamp is not present or the date is illegible or invalid, edit the Received Date in MMDDYY format in the middle of the return.

    Note:

    Per the programming for the received date format, Integrated Submission and Remittance Processing (ISRP) transcribers enter six (6) numerics (MMDDYY) at initial input. When the ISRP transcriber hits the field release, it displays as eight (8) numerics (MMDDYYYY). For ERS, the tax examiner must enter eight numerics. If a received date issue continues to loop, ERS should delete the register and reinput the return.

  8. Edit the Received Date in MMDDYY format according to the following priority:

    1. The earliest legible postmark date (U.S. Postal Service (USPS), foreign or Private Delivery Service (e.g., Federal Express)) on the envelope. Rules for using the USPS postmark or foreign postmark date are as follows:

      If Then
      An envelope is not attached, Use the postmark date stamped on the face of the return.
      An envelope has both a USPS and private metered postmark, Use the USPS postmark.
      An envelope has a foreign and private metered postmark, Use the foreign postmark.
      An envelope has two private metered postmarks, Use the latest private postmark.
      An envelope has only one private metered postmark, Use the private metered postmark.

      Note:

      A private metered postmark is to be considered timely if received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Revenue Officer's Signature date.

    3. Signature date (only if within current year).

    4. Julian control date minus 10 days.

    5. Current date minus 10 days.

  9. Edit the Received Date as follows:

    If And Then
    A timely received date is the only received date stamped on the return,   No editing is required.
    Two or more dates stamped on the return,   1. Use the earliest IRS stamped Received Date.
    2. Circle out all other dates.
    A Federal return is addressed to the IRS delivered to a State agency, Use the postmark date as the received date.
    Federal return is addressed to a State agency,   Use the IRS date stamp as the received date.

    Reminder:

    If an envelope is attached to the return, check envelope for remittance. If remittance is found, hand carry to the manager.

  10. Penalty Assessment consideration - Failure to File. Prior to assessing the penalty for Failure to File:

    1. Check for an approved extension of time to file. See IRM 3.11.180.2.1.3.1 . If applicable, write "Filing Extension Granted" in the upper left margin/side of the return.

    2. Check for a statement that explains the delinquent filing, and

    3. If the taxpayer gives reasonable cause that meets the criteria in Exhibit 3.11.180-6, write "Reasonable Cause Accepted" in the upper left margin/side of the return.

      Note:

      Exhibit 3.11.180-6 is not all inclusive. Refer to IRM 20.1.7, Penalty Handbook - Information Return Penalties, for additional information regarding penalties and reasonable cause.

    4. If a return is delinquent and (a) or (c) above does not apply, assess the penalty for Failure to File. See IRM 3.11.180.2.5.

    5. Write "Late" in the upper left margin/side of the return when assessing the penalty for Failure to File.

3.11.180.2.1.3.1  (01-01-2010)
Form 8809, Request for Extension of Time to File

  1. Form 8809, Application for Extension of Time To File Information Returns, may be requested for Form 8027 submitted on paper or electronically.

    1. A paper Form 8809 may be submitted to the address listed in IRM 3.11.180.2.1.3.1(7).

    2. The fill-in Form 8809 may be completed online via the Filing Information Returns Electronically (FIRE) System at https:\/\/fire.irs.gov.

  2. Form 8809 must be submitted on paper or online by the due date of the return in order for the automatic 30-day extension to be granted.

  3. A second 30-day extension may be requested but will be approved only in cases of extreme hardship or catastrophic events. These requests can only be submitted using the paper Form 8809.

  4. Filers of paper Form 8027 are instructed to attach a copy of their approved extension to the Form 8027 when filed. (e.g., Letter 2519 (CG) if a paper Form 8809 is submitted or print screen of the online approval.)

  5. If the approval letter has not been received by the time the forms are ready to submit, the filer is instructed to send a copy of the timely filed Form 8809.

  6. Approved requests for extension of time to file:

    If And Then
    An extension approval Letter 2519 (CG) is attached The return is filed by the extended due date Write "Filing Extension Granted" in the upper left margin/side of the return.
    A copy of Form 8809 is attached There's an indication the extension request was submitted timely

  7. All requests for an extension of time filed on the paper Form 8809 must be sent using the following address:
    IRS/Enterprise Computing Center-Martinsburg (ECC-MTB)
    Information Reporting Program
    Attn. Extension of Time Coordinator
    240 Murall Drive
    Kearneysville, WV 25430.

3.11.180.2.1.3.2  (01-01-2010)
Form 8508, Request for Waiver From Filing Information Returns Electronically

  1. Form 8508 is a Request for Waiver From Filing Information Returns Electronically.

  2. If employers are required to file original or corrected returns electronically, but such filing would create a hardship, they may request a waiver from these filing requirements by submitting Form 8508, Request for Waiver From Filing Information Returns Electronically, to IRS/ECC-MTB.

  3. All information requested on the Form 8508 must be provided to IRS for the request to be processed. Filers are encouraged to submit Form 8508 to IRS/ECC-MTB at least 45 days before the due date of the returns.

  4. The waiver, if approved, will provide exemption from electronic filing for the current tax year only. Employers may not apply for a waiver for more than one tax year.

  5. An approved waiver from filing Form 8027 electronically does not provide exemption from all filing. The employer must timely file Form 8027 on acceptable paper forms with the Cincinnati Submission Processing Campus (CSPC).

  6. The transmitter should also send a copy of the approved waiver to the Cincinnati Submission Processing Campus (CSPC) where the paper returns are filed.

3.11.180.2.1.4  (01-01-2010)
Establishment Name

  1. Edit to 40 characters. Only alpha (A-Z) and numeric (0-9) characters are allowed.

  2. If name is missing, research IDRS to perfect the name based on the EIN and address.

  3. If this field is blank and the employer's name is complete, enter "SAME." Also, edit arrows to show the reversal.

  4. If Establishment and Employer names are reversed, arrow to correct position.

3.11.180.2.1.5  (01-01-2010)
Employer Identification Number (EIN)

  1. EIN may be present in the entity area or preprinted to the right of entity area in the EIN box.

  2. If the EIN is blank, research the attachments for the EIN of the employer. If not present or is "Applied For," research IDRS for the EIN.

  3. If the EIN is written in another area on the form, arrow/edit to the EIN area.

  4. If research is unsuccessful, prepare correspondence to secure an EIN from the employer. See IRM 3.11.180.2.3.

  5. If undeliverable or no response is received after 45 days :

    1. Write "Failure to Provide TIN" in the upper left margin/side of the return.

    2. Penalty Assessment consideration - Failure to Provide a TIN. The penalty for Failure to Provide a Taxpayer Identification Number (TIN) must be assessed. See IRM 3.11.180.2.5.

    3. See Exhibit 3.11.180-3 to determine the first 2 digits of the EIN (EIN prefix). Edit the 2-digit EIN prefix plus seven (7) periods in the EIN area. Continue processing.

3.11.180.2.1.6  (01-01-2010)
Type of Establishment

  1. One box should be checked to describe the type of service the establishment provides.

  2. Use the following chart to determine the correct code:

    Box(es) checked Code
    1 1
    2 2
    3 3
    4 4
    None 2
    1 and 4 1
    3 and 4 3
    1, 2, and 3 2
    1 and 2 2
    1 and 3 2
    2 and 3 2
    2 and 4 2

  3. Edit the code in the right margin next to the Type of Establishment box.

3.11.180.2.1.7  (01-01-2010)
Establishment's Address

  1. Determine the Establishment Address as follows:

    If Then
    Establishment Address field is blank, Enter employer's address in Establishment Address field.
    No address is present, 1. ResearchIDRS using Employer EIN.
    2. Enter Employer's address in Establishment Address field.
    A valid address is not found but there are entries on Lines 1 through 8, Complete edit procedures and process the return.
    A valid address is not found and there are no entries on Lines 1 through 8, Route to National Tip Reporting Compliance for special handling.

3.11.180.2.1.8  (01-01-2010)
Establishment's City, State, & ZIP Code

  1. The City must be all alphas and a maximum of 25 characters. Edit out hyphens as blanks (spaces). Spaces are allowed.

  2. Enter the two character code for the State. See Exhibit 3.11.180-3 to determine valid state code and ZIP code range.

  3. ZIP code must be either 5 or 9 numerics. Use the State Codes and ZIP Codes Perfection Chart ( See Exhibit 3.11.180-4 ) to perfect any incomplete or missing ZIP codes.

3.11.180.2.1.9  (01-01-2010)
Employer's Name

  1. Edit to 40 characters. Only alpha (A-Z) and numeric (0-9) characters are allowed.

  2. Underline the first name line if more than one name line appears.

  3. If the employer's name is blank, check for the employer's name on Form 8027-T (if present). Write "SAME" in the employer's name line on Form 8027 if the employer's name on Form 8027-T is identical to the establishment name on Form 8027.

    Reminder:

    Integrated Data Retrieval System (IDRS) research should be performed to obtain the Employer's Name.

  4. If no employer name can be determined from the Form 8027-T or IDRS research, write "SAME" in employer entity area.

3.11.180.2.1.10  (01-01-2010)
Employer's Address

  1. If blank, check Form 8027-T or research IDRS using the Employer's EIN.

  2. If this cannot be perfected through research, then use the establishment address.

3.11.180.2.1.11  (01-01-2010)
Employer's City, State & ZIP Code

  1. The City must be all alphas and a maximum of 25 characters. Edit out hyphens as blanks (spaces). Spaces are allowed.

  2. Enter the two character code for the State. See Exhibit 3.11.180-3 to determine valid state code and ZIP code range.

  3. ZIP code must be either 5 or 9 numerics. Use the State Codes and ZIP Codes Perfection Chart ( See Exhibit 3.11.180-4 ) to perfect any incomplete or missing ZIP codes.

  4. If blank, check Form 8027-T or research IDRS using the Employer's EIN. If unable to determine through research, this information may remain blank.

3.11.180.2.1.12  (01-01-2010)
Establishment Number (EN)

  1. If blank, sequentially number each Form 8027 for the employer beginning with "1" until each establishment is numbered. Do not code leading zeros.

  2. If the sequence numbers are not consecutive, accept the employer's numbers. Numbers must be arranged from low order to high order.

  3. Sequentially renumber establishments that have the same number. If the Establishment Number is greater than 5 digits, circle all but the last 5 digits of the number.

    Caution:

    If the Establishment Number (EN) matches the Employer Identification Number (EIN), circle it out. The EIN should not be in the Establishment Number box. If the EIN is missing from the EIN area and is in the Establishment Number box, arrow the EIN to the EIN area. Continue to follow the procedures in IRM 3.11.180.2.1.13.

3.11.180.2.1.13  (01-01-2010)
Charge Receipts Indicator Box

  1. A filer may check the "Yes" or "No " box in response to the question "Does this establishment accept credit cards or other charges?"

  2. The questions and "Yes/No" boxes are located below the entity section. Do not edit.

    If Then
    The filer checks the "Yes" box. Lines 1 and 2 must be completed.
    The filer checks the "Yes" box but does not complete Lines 1 and 2. Initiate correspondence to request the missing information from the employer. See IRM 3.11.180.2.3 , Correspondence Preparation.
    The filer checks the "No" box or neither box is checked. Lines 1 and 2 may be blank. Do not correspond.

3.11.180.2.1.14  (01-01-2010)
Money Amounts Lines 1 through 5

  1. Establishments report amounts on Lines 1 through 5.

  2. Lines 1 and 2 must be completed if the Charge Receipts Indicator "Yes" box is checked.

    1. If Lines 1 and 2 are zero (or show a dash or "none" ), accept and continue processing.

    2. If Lines 1 and 2 are not completed (blank), initiate correspondence to request the missing information from the employer. See IRM 3.11.180.2.3 , Correspondence Preparation.

    3. If undeliverable or no response is received after 45 days , leave blank, and continue processing. Penalty Assessment consideration - Incomplete Return. Write "No Response - Incomplete Return" in the upper left margin/side of the return. Assess the penalty for Failure to File. See IRM 3.11.180.2.5.

  3. If the Charge Receipts Indicator "No" box is checked, or if neither box is checked, Lines 1 and 2 may be blank.

  4. The amount on Line 2 must be greater than the amount on Line 1.

    1. If this condition does not exist, use Letter 1858C to correspond with the employer. See IRM 3.11.180.2.3 , Correspondence Preparation.

    2. If undeliverable or no response is received after 45 days , edit a "1" on Line 2 if there is no amount present. Do not edit if there is an amount present on Line 2. Continue processing. Penalty Assessment consideration - Inconsistent Return. Write "No Response - Inconsistent Return" in the upper left margin/side of the return. Assess the Failure to File penalty. See IRM 3.11.180.2.5.

  5. Line 3 may be zero or blank.

  6. Lines 4a, 4b, and 4c may all be zero or blank.

  7. If amounts are present for Lines 4a or 4b and Line 4c is blank, edit as follows:

    1. Add Lines 4a and 4b.

    2. Use Letter 1858C to inform the employer of any change that is made to Line 4c. See IRM 3.11.180.2.3 , Correspondence Preparation.

  8. If an amount is present on Line 4c only (Lines 4a and 4b are blank), edit as follows:

    If Then
    Line 8 has a number of employees (greater than zero), Edit Line 4c amount on Line 4b.
    Line 8 does not have a number of employees, Edit Line 4c amount on Line 4a.

  9. If an amount is present for Line 1 but no amounts are present on Lines 4a, 4b or 4c, correspond. See IRM 3.11.180.2.3 , Correspondence Preparation.

    1. If undeliverable or no response is received after 45 days, continue processing. Lines 4a, 4b and 4c may all be zero or blank.

  10. An amount is required for Line 5. Line 5 may not be less than Line 2, and Line 5 must be greater than each of Lines 1, 3, 4a, 4b and 4c.

    1. If the amount for Line 5 is missing or is inconsistent with an amount on Lines 1 through 4c, use Letter 1858C to correspond to request the information from the employer.

    2. If undeliverable or no response is received after 45 days, continue processing. Penalty Assessment consideration - Inconsistent Return. Write "No Response - Inconsistent Return" in the upper left margin/side of the return. Assess the Failure to File penalty. See IRM 3.11.180.2.5.

    Note:

    If all receipts including tips are charged, and Lines 2 and 5 are equal, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  11. If two amounts are shown on one line, "X" the amounts, combine for a total and enter the amount to the left of the "X'd" amounts.

3.11.180.2.1.15  (01-01-2010)
Allocation Rate - Center of Line 6

  1. Generally, the allocation rate is 8%. However, the establishment may be granted a lower allocation rate.

    1. The center of Line 6 may be blank. Do not correspond.

    2. If the establishment has been granted a lower allocation rate, the lower rate may be entered on the form. An IRS determination letter granting the lower rate must be attached.

  2. Be careful when checking for the determination letter in the employer's submission. The letter may be attached to one Form 8027 and may be used for some or all of the Forms 8027 submitted by the employer. Verify the rate for each establishment if the determination letter is used for more than one Form 8027.

    Caution:

    Enter the rate based on the determination letter.

  3. There may also be multiple determination letters. Regulations require employers with more than one establishment to request approval from one area office in each IRS territory where establishments are located.

  4. If the letter shows percentages higher than 8%, the employer should not have attached the letter to Form 8027. Disregard the higher rate. The letter was issued by Examination to advise the employer that the percentages in the "Tip Rate Determination Agreement" were recalculated. These percentages are used to determine the minimum amount of tips that should appear on Form 941.

  5. The percentage cannot be below 2% or greater than 8%. Circle out any rate that is lower than 2% or higher than 8%. The computer will use the standard rate of 8%.

  6. If the determination letter is for a different percentage (2% or more, but lower than 8%), edit the percentage as granted in the letter. If the establishment has two allocation rates approved, check for the most current date on the letter and use that rate for the entire year.

  7. Convert a percentage to a four digit field (e.g., "6.5% " would be entered as "0650" or 7.75% would be "0775" ). Do not enter the decimal point.

  8. If a lower rate is entered (2% or more, but less than 8%), but no determination letter is attached,

    1. Use Letter 1858C to correspond with the employer. See IRM 3.11.180.2.3 , Correspondence Preparation.

    2. If undeliverable, no response is received after 45 days, or correspondence is unsuccessful , edit the percentage in the center of Line 6 as "0800" and initiate a non-suspense Letter 1858C to both the employer and the establishment to inform them of the allocation rate change.

3.11.180.2.1.16  (01-01-2010)
Allocation Amount Line 6

  1. The amount on Line 6 should equal Line 5 times 8%, or Line 5 times the lower rate granted by the IRS. This line may contain an alpha "X" if the employer allocates tips using other than the calendar year.

    If And Then
    Line 6 is blank, Line 7 is blank, Complete Line 6 using 8% or the lower rate, whichever applies.

    Note:

    If the establishment has a determination letter approving two allocation rates, apply the lower rate for the entire year.

    Line 7 has a positive entry, Enter an alpha "X" on Line 6.

  2. If you change an amount on Line 6, make the necessary change to Line 7. Use Letter 1858C to notify the employer of any changes. See IRM 3.11.180.2.3 , Correspondence Preparation.

3.11.180.2.1.17  (01-01-2010)
Allocation of Tips Amount Line 7

  1. Procedures for computing Line 7.

    If And Then
    Line 6 is more than Line 4c Line 7 is blank, Enter the difference on Line 7.
    Line 4c equals or is more than Line 6 Line 7 has a negative amount, Circle the amount and enter zero to the right of the amount.
    Line 7 is blank, Enter a zero on Line 7.

    Note:

    If you change an amount on Line 7, use Letter 1858C to notify the employer. See IRM 3.11.180.2.3 , Correspondence Preparation. In addition, if you change a hyphen (-) to a zero (0), correspondence is not needed for this situation.

3.11.180.2.1.18  (01-01-2010)
Condition Codes 4 and U

  1. There are two codes that may be edited:

    1. Code "4" is edited to the right of Line 7a, 7b or 7c, as instructed in IRM 3.11.180.2.1.19.

    2. Code "U" is edited to the right of Line 8, as instructed in IRM 3.11.180.2.1.20.

3.11.180.2.1.19  (01-01-2010)
Method of Allocation Boxes Lines 7a through 7c

  1. If Line 7 is more than zero, an entry must be made in either Line 7a, 7b or 7c. Enter one of the following codes to the left of the box checked.

    1. Line 7a - enter "1" ,

    2. Line 7b - enter "2" , or

    3. Line 7c - enter "3" , if a good-faith agreement (GFA) is attached. See (2) below for additional information.

    If Then
    No boxes are checked and Line 7 is greater than zero, Edit a Condition Code 4 to the right of Line 7a, 7b or 7c.
    No allocation was made (Line 7 is zero), 1. The method of allocation should be blank.
    2. Circle out any entry.
    More than one box is checked, 1. Use the following priority to determine code:
    a. Line 7c, with a good-faith agreement (Code 3),
    b. Line 7a (Code 1),
    c. Line 7b (Code 2).
    2. Circle out the remaining boxes.

  2. If Line 7c is checked, a copy of the "good-faith agreement" must be attached.

    Note:

    The good-faith agreement may be applicable for more than one return. Write "GFA" for "good-faith agreement" in the upper left margin/side of each applicable return.

    1. If the agreement cannot be found in the employer's submission, use Letter 1858C to request the missing information from the employer. See IRM 3.11.180.2.3 , Correspondence Preparation.

    2. If undeliverable or no response is received after 45 days , edit a Condition Code "4" to the right of Line 7a, 7b or 7c to force the document to good tape. Initiate a non-suspense Letter 1858C to inform the employer that the agreement will not be reflected in the account information.

3.11.180.2.1.20  (01-01-2010)
Number of Directly Tipped Employees Line 8

  1. A number greater than zero should be present on Line 8.

  2. If Line 8 is zero or blank, edit a "U" to the right of the line.

3.11.180.2.1.21  (01-01-2010)
Signature Line

  1. The IRS has issued rules that allow corporate officers or duly authorized agents to sign employment tax forms by facsimile. This includes alternative signature methods such as computer software programs or mechanical devices.

  2. A signature should be entered on each Form 8027. However, if no entry is made, issue Letter 1858C, "Information Return of Tip Income (Form 8027) Incomplete for Processing" to request a signature.

    1. When the reply is received, attach the taxpayer's response to the return and continue processing.

    2. If no reply is received, contact National Tip Reporting Compliance for special handling and/or follow-up action.

3.11.180.2.1.22  (01-01-2010)
Amended Documents

  1. Employers/Establishments may send amended Form 8027 to the Service to be processed.

    If Then
    The "Amended Return" box is marked Continue processing.
    If the "Amended Return" box is not marked, and

    • The word "supplemental" , "duplicate " , or "additional" is written on the return or an attachment, or

    • There is positive indication that the employer/establishment filed previously.

    		 Mark the "Amended Return" box.

  2. There is no special numbering or blocking for amended Form 8027.

3.11.180.2.2  (01-01-2010)
Disposition

  1. After Coding and Editing of Form 8027, forward to final batching and numbering.

3.11.180.2.3  (01-01-2010)
Correspondence Preparation

  1. In compliance with a Chief Counsel opinion issued September 2, 2008, tax examiners will no longer send returns back to the taxpayer when corresponding for missing signature, missing information and supporting schedules and documentation on refund or zero balance returns (effective October 5, 2009).

  2. Written communication to the employer and/or establishment is used to request additional or missing information in order to perfect the Form 8027. Correspondence is generally used after research and the needed information cannot be obtained.

  3. In most cases, correspondence will be sent to the employer. If the employer information is not present, or the address is incomplete or illegible, send correspondence to the establishment.

  4. Utilize the Letter 1858C, "Information Return of Tip Income (Form 8027) Incomplete for Processing" , via a Form 3696, Correspondence Action Sheet, (or other approved Correspondence Action Sheet).

  5. Letter 1858C should address all correspondence issues identified during review and should contain:

    • The current date.

    • The name and address of the employer or establishment.

    • The return number or title and tax year.

    • All "select" paragraphs that pertain to the missing information or the information in question.

    • The period of time the taxpayer has to respond (e.g., 30 days from the date of the letter), when applicable.

    • Instructions for faxing information, when applicable.

    • The name, phone number and duty hours of either the IRS tax examiner or supervisor the taxpayer may call if there are additional questions (per IRM 3.11.180.1.1).

    • Appropriate select paragraphs, based on the following Correspondence Guide:

      Condition Letter 1858C Paragraph Suspend IRM Reference
      Number of Forms 8027 fewer than the count indicated on Form 8027-T. Sel. Para. V No 3.11.180.1.3(6)
      Separate Forms 8027 are needed. Sel. Para. W Yes 3.11.180.1.3(9)
      EIN is incomplete or missing. Sel. Para. H Yes 3.11.180.2.1.5(4)
      3.11.180.3.2.8(3)
      Charge Receipts Indicator "Yes " box is checked. Lines 1 and 2 are blank. Sel. Para. I Yes 3.11.180.2.1.14(2)
      3.11.180.2.1.13(2)
      The amount on Line 2 is not greater than the amount on Line 1. Sel. Para. J Yes 3.11.180.2.1.14(4)
      3.11.180.3.2.11(4)
      Line 4c is incorrect or blank and an amount is reported on Line 4a or 4b. Sel. Para. K No 3.11.180.2.1.14(7)
      3.11.180.3.2.11(6)
      An amount is reported on Line 4a only or Line 4b only and Line 4c is greater than (or less than) Line 4a or Line 4b (whichever is applicable). Sel. Para. K No 3.11.180.3.2.11(7)
      An amount is reported on Line 1 but no amounts are present on Lines 4a, 4b or 4c. Sel. Para. K Yes 3.11.180.2.1.14(9)
      3.11.180.3.2.11(9)
      No amount or an incorrect amount is shown on Line 5. Sel. Paras. L and N or M and N Yes 3.11.180.2.1.14(10)
      3.11.180.3.2.11(10)
      Lower tip rate (center of Line 6) not supported by an IRS determination letter. Sel. Para. O Yes 3.11.180.2.1.15(8)
      3.11.180.3.2.12(5)
      Lower tip rate replaced with standard 8% tip rate. Sel. Para. P No 3.11.180.2.1.15(8)
      3.11.180.3.2.12(5)(b)
      No amount or an incorrect amount is reported on Line 6. Sel. Para. Q No 3.11.180.2.1.16(2)
      3.11.180.3.2.12(12)
      The amount on Line 7 is changed due to a change to Line 6. Sel. Para. R No 3.11.180.2.1.17
      3.11.180.3.2.12(12)
      No amount or an incorrect amount is shown on Line 7. Sel. Para. S No 3.11.180.2.1.17
      3.11.180.3.2.12(12)
      Line 7c is checked, but the "good-faith agreement" is not attached. Sel. Para. T Yes 3.11.180.2.1.19
      3.11.180.3.2.13(3)
      The "good-faith agreement" was not submitted as requested. Sel. Para. U No 3.11.180.2.1.19
      3.11.180.3.2.13(3)
      Information appears to be split between establishments. Sel. Para. 0 (zero) Yes 3.11.180.3.4(3)
      Signature is required on return(s) Sel. Para. G and Z Yes 3.11.180.2.1.21(2)

      • Use Sel. A to identify a specific establishment if multiple forms were included in the employer's submission.

      • Use Sel. B, C or D as the opening paragraph. Use Sel. E and F as appropriate.

      • Refer to the "Notes" at the end of Letter 1858C for additional information.

  6. Suspense a copy of the correspondence with the associated return for 45 days. Keep this file by date/EIN order or date/alpha order if the EIN is missing.

  7. Purge the suspense file 15 days after the 30 day response period has expired.

  8. If undeliverable or no response is received after 45 days , refer to the No Reply Chart below.

  9. If working a prior year return (TY2008) that is not processable, and current date is after November 30:

    1. Do not correspond. Since the prior year is purged from the database in January, any correspondence sent after November 30 would not provide time for the return to post prior to the purge.

    2. Route the TY2008 form to National Tip Reporting Compliance for special handling.

  10. The following No Reply Chart provides a road map to the specific field instructions in this IRM:

    If no reply or undeliverable and Then
    Separate Forms 8027 are needed. 1. Assess the penalty per
    IRM 3.11.180.1.3(9)(c).

    2. Keep the establishment list attached.

    3. Process the Form(s) 8027 received.
    EIN is incomplete or missing. 1. Assess the penalty per
    IRM 3.11.180.2.1.5(5) or IRM 3.11.180.3.2.8(3).

    2. Determine the EIN prefix.

    3. Edit EIN prefix and seven (7) periods.

    4. Continue processing.
    Charge Receipts Indicator "Yes " box is checked. Lines 1 and 2 are blank. 1. Assess the penalty per
    See IRM 3.11.180.2.1.14(2)(c).

    2. Continue processing.
    The amount on Line 2 is not greater than the amount on Line 1. 1. See IRM 3.11.180.2.1.14(4)(b) and IRM 3.11.180.3.2.11(4).

    2. Edit the form and assess the penalty per instructions.

    3. Continue processing.
    No amount or an incorrect amount is shown on Line 5. 1. See IRM 3.11.180.2.1.14(8)(b) and IRM 3.11.180.3.2.11(10).

    2. Assess the penalty and edit Line 5 as instructed.

    3. Continue processing.
    Lower tip rate (center of Line 6) is not supported by an IRS determination letter. 1. See IRM 3.11.180.2.1.15(8) and IRM 3.11.180.3.2.12(5).

    2. Use standard 8% (0800) rate and inform employer.

    3. Continue processing.
    Line 7c is checked, but the "good-faith agreement" is not attached. 1. Edit Condition Code "4" . See IRM 3.11.180.2.1.19(2)(b) and IRM 3.11.180.3.2.13(3).

    2. Initiate a non-suspense Letter 1858C to the employer that the "good-faith agreement " is not reflected on the account.

    3. Continue processing.
    Information appears to be split between establishments. 1. Assess the penalty per
    IRM 3.11.180.3.4(3) .

    2. Process document as instructed.

3.11.180.2.4  (01-01-2010)
Use of Fax for Taxpayer Transmissions

  1. Filing of original returns via fax is permissible as part of the return perfection process where contact with the employer/establishment has been made and documented by the Service. In these circumstances, fax signatures are acceptable for the original returns.

  2. Contact with the employer or establishment may be by telephone or correspondence. Follow local procedures to determine which method of contact will be used.

  3. Examiners will indicate the fax paragraph on the Form 3696, Correspondence Action Sheet, (or other approved Correspondence Action Sheet), to advise employers/establishments of the option to fax their response.

3.11.180.2.5  (01-01-2010)
Background of Penalty Assessments

  1. The Revenue Reconciliation Act of 1989 changed the penalty provisions (Sections 6721-6724 of the Internal Revenue Code) for any documents, including corrections, which are filed after the original filing date for the return. The penalty for failure to file correct information returns is "time sensitive," in that prompt correction of failures to file, or prompt correction of errors on returns that were filed, can lead to reduced penalties.

  2. Penalties can be waived if failures were due to reasonable cause and not to willful neglect. The abatement criteria for all information returns is reasonable cause (Section 6724(a)).

  3. Refer to IRM 20.1.7, Penalty Handbook - Information Return Penalties, for additional information regarding penalties and reasonable cause criteria.

3.11.180.2.5.1  (01-01-2010)
Applicable Penalties

  1. Penalty procedures apply to all tax years beginning with 1985 to current tax year.

  2. The Failure to File penalty and the Failure to Provide a Taxpayer Identification Number (TIN) apply not only to delinquent returns but also to returns that are filed in unprocessable condition and the employer does not respond to correspondence requesting the necessary information.

  3. The penalty generally is $50 for each information return that is not filed, or is not filed correctly, by the prescribed filing date, with a maximum penalty of $250,000 per year ($100,000 for certain small businesses with average annual gross receipts, over the most recent 3-year period, not in excess of $5,000,000). The penalty generally is reduced to:

    1. $30 for each failure to comply if the failure is corrected more than 30 days after the return was due, but on or before August 1 of the calendar year in which the return was due, with a maximum penalty of $150,000 per year ($50,000 for certain small businesses with average annual gross receipts, over the most recent 3-year period, not in excess of $5,000,000).

    2. $15 for each failure to comply if the failure is corrected within 30 days after the date the return was due, with a maximum penalty of $75,000 per year ($25,000 for certain small businesses with average annual gross receipts, over the most recent 3-year period, not in excess of $5,000,000).

  4. Intentional Disregard of Filing Requirements - If any failure to file a correct information return is due to intentional disregard of the filing and correct information requirements, the penalty is at least $100 per information return with no maximum penalty.

  5. If an employer is required to file electronically but fails to do so and does not have an approved waiver (Form 8508) on record, the employer will be subject to a penalty. See IRM 3.11.180.2.5.2 for additional information.

  6. No more than one penalty per return can be imposed even if there is more than one failure on the same information return. However, where a return is filed with multiple failures and the penalty amounts differ, the higher penalty should be imposed.

    1. For example, only one penalty may be imposed on a return which is filed both late and incomplete.

    2. If the failure to provide the information is due to intentional disregard, but the late filing is not, the intentional disregard penalty should be imposed.

3.11.180.2.5.2  (01-01-2010)
Form 8508, Request for Waiver From Filing Information Returns Electronically, - Penalty Information.

  1. Form 8508 is a Request for Waiver From Filing Information Returns Electronically.

  2. If an employer is required to file electronically but fails to do so and does not have an approved waiver on record, the employer will be subject to a penalty of $50 per return in excess of 250.

  3. If employers are required to file original or corrected returns electronically, but such filing would create a hardship, they may request a waiver from these filing requirements by submitting Form 8508, Request for Waiver From Filing Information Returns Electronically, to IRS/ECC-MTB.

  4. Generally, only the employer may sign the Form 8508. A transmitter may sign if given power of attorney; however, a letter signed by the employer stating this fact must be attached to the Form 8508.

  5. A transmitter must submit a separate Form 8508 for each employer.

  6. All information requested on the Form 8508 must be provided to IRS for the request to be processed. Filers are encouraged to submit Form 8508 to IRS/ECC-MTB at least 45 days before the due date of the returns.

  7. The waiver, if approved, will provide exemption from electronic filing for the current tax year only. Employers may not apply for a waiver for more than one tax year.

  8. All requests for a waiver should be sent using the following address:
    IRS - Enterprise Computing Center - Martinsburg
    Information Reporting Program
    Attn. Extension of Time Coordinator
    240 Murall Drive
    Kearneysville, WV 25430.

  9. If a waiver request is approved, the transmitter should keep the approval letter on file.

  10. An approved waiver from filing Form 8027 electronically does not provide exemption from all filing. The employer must timely file Form 8027 on acceptable paper forms with the Cincinnati Submission Processing Campus (CSPC).

  11. The transmitter should also send a copy of the approved waiver to the Cincinnati Submission Processing Campus (CSPC) where the paper returns are filed.

3.11.180.2.5.3  (01-01-2010)
Assessing the Penalty

  1. A photocopy of Form 8027, Form 8027-T (if the employer files for more than one establishment), and any other pertinent supporting documentation (e.g., extension approval letter) should be made if a penalty is being assessed. The photocopy will be used for penalty processing. The original will be used to continue normal processing.

  2. A photocopy of the envelope should also be made if the Form 8027 is delinquent.

  3. No more than one penalty per return can be imposed even if there is more than one failure on the same information return. However, where a return is filed with multiple failures and the penalty amounts differ, the higher penalty should be imposed.

    1. For example, only one penalty may be imposed on a return which is filed both late and incomplete.

    2. If the failure to provide the information is due to intentional disregard, but the late filing is not, the intentional disregard penalty should be imposed.

  4. The penalty is assessed on the Civil Penalty Module on IDRS using the employer's EIN on MFT 13. Enter Command Code REQ54 to bring up the ADJ54 screen. On the ADJ54 screen, input the following fields:

    1. Sequence Number (SEQ-NUM),

    2. Blocking Series (BLK) 53,

    3. Received Date (IRS-RCVD-DT),

    4. TC 290, with a zero (.00) amount (AMT),

    5. Hold Code (HOLD-CD) zero (0),

    6. Penalty Reference Number (CD) 638 and the amount (AMT) of the penalty,

    7. "Y" (Yes) in SOURCE-DOC-ATTACHED, and

    8. "8027" in REMARKS.

  5. If a Form 8027-T accompanies a Form 8027, use the employer's EIN and data (if present on Form 8027-T) to assess the penalty.

  6. The penalty for Failure to File is $50, $30 or $15 (depends when the return is received) per Form 8027 and is computed as: $50, $30 or $15 times the number entered in the Form 8027-T box that is labeled "Number of accompanying Forms 8027." This penalty has an annual limit of $250,000 ($100,000 for certain small businesses).

    Note:

    See IRM 3.11.180.2.5 for additional information.

  7. Before assessing the penalty:

    1. Check for Employment Code "F" using Command Code (CC) ENMOD, CC BMFOLE or CC INOLES. If present, do not assess the penalty.

    2. Check the Civil Penalty Module for previous assessments of the Failure to File penalty. Since this penalty cannot exceed the maximum amount of $250,000 ($100,000 for certain small businesses) annually, make the assessment for the amount of the penalty or the amount necessary to reach the annual limit, whichever is less.

      Note:

      See IRM 3.11.180.2.5 for additional information.

  8. Edit the penalty reference number and the amount of the penalty on the copy or complete Form 9860, Adjustment Input Document/Case History Sheet.

    Note:

    If you use Form 9860, do not edit the above information on the copy. Attach Form 9860 to the photocopy of Form 8027 (below the Entity) with the applicable fields completed (e.g., Tax Examiner Number, MFT 13, Tax Period, Sequence Number, Blocking Series 53, 290 with zero (.00) amount, Credit Reference 638, Amount, etc.).

  9. Create an IDRS source document consisting of the copy of Form 8027-T or Form 8027, if no transmittal was filed.

    Note:

    If assessing penalties on multiple Forms 8027 for the same EIN (same employer, different establishments), you may attach the Forms 8027 together and use one Form 9860 for the penalty assessment.

  10. Forward the IDRS source document to Files.

    Note:

    Refer to IRM 20.1.7, Penalty Handbook - Information Return Penalties, for specific procedures in regard to assessing penalties on Information Returns. Always use Reference Number 638, instead of numbers assigned to Information Return Processing (IRP).

3.11.180.2.5.4  (01-01-2010)
Replies to Penalty Assessment Notices

  1. An employer or establishment may respond to a CP 215 civil penalty notice, or request that a penalty assessment be forgiven. A valid Taxpayer Identification Number (TIN) may be furnished and/or an explanation for filing late may be provided.

  2. If the penalty was charged because the employer did not respond to a request for necessary information and the employer or establishment resubmits the returns, check to see if the returns are processable.

    1. If the returns are processable, follow processing procedures.

    2. Route the notice response, correspondence, or any penalty abatement request to Cincinnati Campus Compliance Collection Operation. Indicate whether the return is "processable" or " not processable" based on the information received.


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