Form 8027 is the employer's annual information return of tip income and allocated tips. You file it if you operate a large food or beverage establishment: one in the 50 states or DC where customers customarily tip, and where you normally employed more than 10 employees on a typical business day in the preceding year. It reports gross receipts and reported tips, and if tips reported fall short of 8% of gross receipts, it allocates the difference to directly tipped employees.
Everything below comes from the IRS 2026 Instructions for Form 8027, published October 8, 2026, as of October 2026.
Does your venue count as a large food or beverage establishment?
| Test | What the instructions say |
|---|---|
| Location | In the 50 states or the District of Columbia |
| Tipping is customary | Generally not in a cafeteria-style operation, or where at least 95% of total sales (other than carryout) carry a service charge of 10% or more |
| Food or beverage operation | Food or drink consumed on the premises, other than fast-food operations where customers order, pick up and pay at a counter or window and carry the food elsewhere |
| 10-employee test | More than 10 employees on a typical business day during the preceding calendar year |
For the 10-employee test, the optional worksheet averages employee hours on the busiest and quietest months: if the result is more than 80 hours, you meet it. Include every employee at all your food or beverage operations, not just servers, but leave out fast-food staff and anyone owning 50% or more of the corporation's stock.
One form per location
Here's the rule that catches hotel and multi-outlet owners, and it's not obvious: each location is a separate food or beverage operation with its own Form 8027. Within one building, a gourmet restaurant, a coffee shop and a cocktail lounge count separately if their customers sit in separate areas and you record gross receipts separately. Even the same room can be split by time, such as a cafeteria-style lunch and a full-service dinner, if receipts are recorded separately. When you file more than one paper Form 8027, add Form 8027-T as the transmittal.
The 8% rule and allocated tips
Line 6 is gross receipts from food and beverage times 8%, or a lower rate if the IRS has approved one. If the tips your employees reported don't reach that figure, the shortfall is allocated among directly tipped employees and shown in box 8 of their Form W-2.
- The 8% figure is for allocation only. The instructions stress that it doesn't mean directly tipped employees need to report only 8%: they report all their tips.
- Employees receiving $20 or more a month in cash tips must report 100% of their tips to you in writing, including tips on cards and tips shared with other staff.
- You can petition for a lower rate, but not lower than 2%, and the petition has to show clearly that less than 8% should apply. It comes with a user fee.
Three ways to allocate the shortfall
| Method | When you can use it |
|---|---|
| Good-faith agreement | A written agreement between employer and employees, kept with your records |
| Hours-worked method | Only if the establishment employs fewer than the equivalent of 25 full-time employees in a payroll period, meaning fewer than 200 employee hours worked per business day on average |
| Gross receipts method | The default when no good-faith agreement applies |
You check box 7a, 7b or 7c to show which method you used. If you've allocated over a period other than the calendar year, such as biweekly or quarterly, you mark line 6 and enter the allocated tips from your records on line 7.
What's new and when it's due
- New line B asks whether the establishment took part in a voluntary tip reporting program with the IRS during the year, such as a TRDA, TRAC or EmTRAC agreement. You must tick Yes or No.
- Line A asks whether you accept credit cards, debit cards or other charges; if Yes, lines 1 and 2 need an amount, even if zero.
- The FIRE system is retired. IRIS is now the only way to file Form 8027 electronically.
- If you file 10 or more information returns in the year, you must file electronically.
- Paper Forms 8027 for 2026 are due March 1, 2027; filed electronically, they're due March 31, 2027.
Keep supporting records for 3 years after the due date of the return or statement they relate to.
If the information return is going to be late, how to get extra time to file information returns explains how to get more time.
Before you file
- Run the 10-employee worksheet using last year's busiest and quietest months.
- List each separate food or beverage operation and give each its own form.
- Total gross receipts from food and beverages, leaving out state and local taxes and most tips.
- Total charged tips and charge receipts (lines 1 and 2), service charges under 10% paid as wages (line 3), and tips reported by indirectly and directly tipped employees (lines 4a and 4b).
- Allocate any shortfall under the 8% rule and carry it to box 8 of each W-2.
If your till system is due an upgrade, a restaurant POS system that records receipts by outlet and tips by employee makes this form far less painful. Keep service charges separate too: any part paid to an employee is wages, with federal income tax, social security and Medicare tax withheld, and it isn't reported as tips on Form 8027.
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The verdict
If you run a sit-down restaurant or bar with more than 10 staff on a normal day, it's safest to assume Form 8027 applies and check the test once a year. The bit owners get wrong is the per-location rule, and the bit staff get wrong is thinking 8% is all they need to report. File through IRIS by March 31, 2027, and keep tip records clean enough that the allocation is small or zero.
Restaurants and salons can claim a credit for tip taxes, which the FICA tip credit guide explains.
Frequently asked questions
Who must file Form 8027?
Employers who operate a large food or beverage establishment: in the 50 states or DC, where tipping is customary, with more than 10 employees on a typical business day in the preceding calendar year.
What is the 8% rule on Form 8027?
If tips reported by employees are less than 8% of gross receipts, or an approved lower rate, the difference is allocated to directly tipped employees and shown in box 8 of their Form W-2.
When is Form 8027 due for 2026?
By March 1, 2027, on paper, or March 31, 2027, if filed electronically through IRIS.
Can I file Form 8027 through FIRE?
No. The FIRE system is retired, and IRIS is now the only system for filing Form 8027 electronically.
Do fast-food restaurants file Form 8027?
Fast-food operations, where customers order and pay at a counter and carry food away, aren't food or beverage operations for this purpose, so they don't count.
