Form 8027: Employer Tip Reporting for Large Food and Beverage Businesses
Published November 7, 2026
Form 8027 is the annual return an employer files to report tip income at a large food or beverage establishment. Employers also use it to figure any tips that must be allocated to employees. The Instructions for Form 8027 (2025) explain the rules. This post is general information, not advice about a specific business.
Who must file
You must file Form 8027 if you are an employer who operates a large food or beverage establishment. The instructions say an establishment is large when all three of these are true:
- It is located in the 50 states or the District of Columbia.
- Tipping of food or beverage employees by customers is customary.
- The employer normally had more than 10 employees on a typical business day during the preceding year.
Each food or beverage operation is separate. A separate Form 8027 is filed for each location, even within the same building.
The 10-employee test looks at a typical business day. It uses the average number of employee hours worked on a typical day. The instructions include an optional worksheet. You keep it for your records and do not send it to the IRS.
Include employees at all of your food or beverage operations, even if one operation has fewer than 10 employees. A food or beverage operation serves food or drink for consumption on the premises. Fast-food operations are excluded for this purpose. An operation is fast-food only if customers order, pick up, and pay at a counter or window, and then carry the food to another location.
What employees must report to you
Employees who receive tips must report 100% of their tips to you in a written report. Cash tips include tips paid by cash, check, debit card, and credit card. The report should include charged tips, tips received directly from customers, and tips shared with other employees under a tip-sharing arrangement.
The 8% allocation rule
You must allocate tips among employees if the total tips reported to you during a payroll period are less than 8% of the establishment's gross receipts for that period. The instructions allow a lower rate if one has been approved. The allocation goes to directly tipped employees who worked for the establishment in that period and have a shortfall. Indirectly tipped employees do not receive an allocation.
Generally, the amount allocated is the difference between the tips reported and 8% of gross receipts. Tips are generally not included in gross receipts.
Give each employee who has been allocated tips a Form W-2 that shows the allocated amount in box 8. Allocated tips are not subject to withholding. The instructions also explain the three allocation methods.
What counts as a tip
In general, an amount is a tip if three things are true. The payment is not negotiated or dictated by the employer. The customer decides who receives it. The customer sets the amount, which can be zero.
Service charges are treated differently from tips. They are not reported as tips on Form 8027.
When to file
File Form 8027 by March 2, 2026. If you file electronically, the due date is March 31, 2026. If you file more than one paper Form 8027, include Form 8027-T.
You can ask for more time on Form 8809. File it as soon as you know you need more time. Do not file it before January 1 of the filing year, and not after March 2, 2026, for paper or March 31, 2026, for electronic filing.
Keep your records
Keep the records that support your information returns, your employee statements, and your tip allocations for 3 years after the due date of the return or statement. Related topics include the employer tip credit on Form 8846 and unreported tip income on Form 4137. For the worker side, see No Tax on Tips and Overtime: Caps, Phase-Outs, and How to Claim.
Sources: Sources: IRS, Instructions for Form 8027 (2025) (https://www.irs.gov/pub/irs-prior/i8027--2025.pdf) This is general information, not advice about your specific return.
